The following article was written by Chas Sisk and was published in The Tennessen on 2/18/2009:
“The developer of a Midtown condominium is demanding tens of thousands of dollars from people who backed out of their contracts, stepping up the battle over who should pay for the slowing condo market.
Franklin-based Bristol Development Group has told several former contract holders in its Bristol West End project that the firm would pursue legal action if they do not compensate the firm for money it says it lost when the units were sold to new buyers.
The firm has given these former contract holders until the end of the month to pay damages or face a court case. The contract holders, some of whose units were resold more than a year ago, were told they might face litigation in letters sent by special delivery that arrived Monday.
“This is about a handful of people that didn’t fulfill their contracts,” said Charles Carlisle, Bristol’s chief executive. “Bristol honored their contracts.”
Carlisle said the letters were sent to “10 or less” former contract holders, but he declined to discuss details of the demand, citing potential litigation.
The letters, which were sent by the Birmingham, Ala.-based law firm Burr & Forman, are the latest in a series of maneuvers taken by Nashville condo developers to deal with the slow pace of closings in their developments.
Many people who signed up in 2005 and 2006 to buy condos downtown and in Midtown now say they can’t afford to follow through on their contracts because lending standards have toughened and because condo values have fallen.
They say the earnest money deposits they put down on the units, often as little as $5,000, are fair compensation for developers.
But Bristol has maintained that contract holders have a legal obligation to close, even if they forfeit their deposits. As early as 2007, the firm sent letters warning that those who back out of their deals could be dunned for not closing.
Bristol appeared to back off last year as it resold units that had been under contract to new buyers. But in the letters received this week, the firm says it should be paid the difference between the original and the final sales price, as well as interest, lost profits, marketing, utilities, property taxes, attorney’s fees and homeowners association dues.
The letters also say recipients could be made to pay legal costs if they fight the demand. Bristol says it will give former contract holders credit for their earnest money, which continues to be held in escrow.
The firm decided to pursue litigation after closing the last of the Bristol West End’s161 units in October, Carlisle said. He declined to say how much Bristol seeks to recover, but individual letters demand $10,000 to $30,000.
Carlisle also declined to comment on whether Bristol would pursue damages from buyers who back out of its 418-unit tower Icon in the Gulch, which is trying to get contract holders to close.
Jean Harrison, an attorney who has represented former condo buyers in their dealings with developers, said condo developers around the country are trying such tactics to deal with the cooling condo market.
But no local developer to date has tried to recover losses on units that it has since resold. Other developers may try to copy the move as the shakeout continues, she said.
“This is going to be a continuing problem,” Harrison said.
“This is the fruit of what happens when people are buying on speculation.”
Wow. I have tried to be an advocate for the Bristol Development group located in Franklin, but I have to say that their current actions are absolutely deplorable. The risk that their buyers have taken is quantified in amount of earnest money they (the Bristol Development Group) agreed to accept. If that earnest money amount is not high enough to cover any losses created by the seller, that is the fault of the developer and not the buyer.
It would now be my personal advice to all contracted buyers who do not think that they can qualify to purchase in any Bristol Development group project to gather in one large group represented by one law firm to prepare for a class action suit. This might be the only way to fight a giant like Bristol who might be in enough financial trouble to be desperate.
To the Bristol Development Group’s Executives: I have been one of your staunchest advocates for more than 2 years and I thought that we could all pull through this economic downtown by working together. There was a great opportunity to meet in the middle and for some reason that was not good enough. But, it is my fiduciary duty to protect the buyers I represent, that is my charge as their buyer’s agent and I intend to do so to the fullest of my ability.
UPDATE 6/5/09:
It was reported in the Nashville Business Journal today that the Bristol Development Group has indeed filed lawsuits against 3 individuals for damages totaling around $80,000. When asked by the NBJ as to Bristol’s motivation for bringing these lawsuits, CEO Charles Carlisle simply replied, “People who sign a contract should expect to perform.” It is interesting to note that the Bristol Group was able to resell all of the condos that fell out of contract, some for higher prices.
I am no fool, it is clear to me that Bristol is sending this loud and clear message: If you don’t plan on closing on your contracted condo, you will get sued no matter if we resell your unit or not. I should also mention that there are at least 5 individuals who are suing the Bristol Development Group claiming “the developers fraudulently represented a shorter than expected construction time to avoid financial and other disclosures required to the U.S. Department of Housing and Urban Development.”
UPDATE 8/11/09:
There has not been any progress made by Jean Harrison’s lawsuit nor has any other suit been brought against the Bristol Group since.
March 26, 2009, 8:13 am
What about the contract that they signed? Where is the buyer’s responsibility in this? Your argument seems a bit near-sighted.
March 26, 2009, 3:13 pm
What about the contract that they signed? Where is the buyer’s responsibility in this? Your argument seems a bit near-sighted.
March 26, 2009, 3:13 pm
What about the contract that they signed? Where is the buyer’s responsibility in this? Your argument seems a bit near-sighted.
March 26, 2009, 3:13 pm
What about the contract that they signed? Where is the buyer’s responsibility in this? Your argument seems a bit near-sighted.
June 8, 2009, 3:52 am
I'm not sure why you need earnest money explained to you since you are a licensed agent but I will comment. I see that you represent only buyers so I understand that you see it from the buyers' perspective. I work with both buyers and sellers so I'm not taking sides; I'm commenting on your predilection. We know that earnest money is held in escrow to protect the seller in case the buyer breaches the contract. Since nothing is black and white and many scenarios can occur that can result in a breach, either party has the right to sue for actual damages (depending on the contract's verbiage) caused by the breach. The amount of the damages can differ, depending on the amount of loss. Nobody knows what that will be until the breach occurs so it may end up to be more than the amount of the earnest $. Since the same laws apply for new condos, resales, etc., here is just one example of why we have both earnest money and contracts:Say that a seller had received a $10,000 higher offer from buyer B right after signing a contract with buyer A yet had to honor the existing CONTRACT. What if the transaction wasn't closing for 3 months so the property is off the market for 3 months but buyer A backed out a week before closing. The seller is entitled to keep the earnest money, depending on the verbiage in the contract, but now the house has been off the market for three months plus however long it takes to resell. The seller now couldn't buy a home that s/he was trying to buy and lost a job because he/she couldn't move because the buyer didn't close. The buyer's decision has caused a domino effect. If the contract states it, in this case it is the seller who has the right to sue for specific performance. Any Real Estate expert/guru should know this. Even though the developers didn't lose a job or a home, the same laws apply to this seller. In the case of the condos, nobody could have predicted that the market would change for the worse. Perhaps a buyer decided this price was no longer in their best interests. That shouldn't matter. A contract is a legal and binding agreement and the seller may be able to keep the earnest money but the buyer still breached a contract. However, to win a case, the seller has to prove damages. The bottom line, though, would be what is decided by the courts.
June 8, 2009, 3:52 am
I'm not sure why you need earnest money explained to you since you are a licensed agent but I will comment. I see that you represent only buyers so I understand that you see it from the buyers' perspective. I work with both buyers and sellers so I'm not taking sides; I'm commenting on your predilection. We know that earnest money is held in escrow to protect the seller in case the buyer breaches the contract. Since nothing is black and white and many scenarios can occur that can result in a breach, either party has the right to sue for actual damages (depending on the contract's verbiage) caused by the breach. The amount of the damages can differ, depending on the amount of loss. Nobody knows what that will be until the breach occurs so it may end up to be more than the amount of the earnest $. Since the same laws apply for new condos, resales, etc., here is just one example of why we have both earnest money and contracts:Say that a seller had received a $10,000 higher offer from buyer B right after signing a contract with buyer A yet had to honor the existing CONTRACT. What if the transaction wasn't closing for 3 months so the property is off the market for 3 months but buyer A backed out a week before closing. The seller is entitled to keep the earnest money, depending on the verbiage in the contract, but now the house has been off the market for three months plus however long it takes to resell. The seller now couldn't buy a home that s/he was trying to buy and lost a job because he/she couldn't move because the buyer didn't close. The buyer's decision has caused a domino effect. If the contract states it, in this case it is the seller who has the right to sue for specific performance. Any Real Estate expert/guru should know this. Even though the developers didn't lose a job or a home, the same laws apply to this seller. In the case of the condos, nobody could have predicted that the market would change for the worse. Perhaps a buyer decided this price was no longer in their best interests. That shouldn't matter. A contract is a legal and binding agreement and the seller may be able to keep the earnest money but the buyer still breached a contract. However, to win a case, the seller has to prove damages. The bottom line, though, would be what is decided by the courts.
June 8, 2009, 3:52 am
I'm not sure why you need earnest money explained to you since you are a licensed agent but I will comment. I see that you represent only buyers so I understand that you see it from the buyers' perspective. I work with both buyers and sellers so I'm not taking sides; I'm commenting on your predilection. We know that earnest money is held in escrow to protect the seller in case the buyer breaches the contract. Since nothing is black and white and many scenarios can occur that can result in a breach, either party has the right to sue for actual damages (depending on the contract's verbiage) caused by the breach. The amount of the damages can differ, depending on the amount of loss. Nobody knows what that will be until the breach occurs so it may end up to be more than the amount of the earnest $. Since the same laws apply for new condos, resales, etc., here is just one example of why we have both earnest money and contracts:Say that a seller had received a $10,000 higher offer from buyer B right after signing a contract with buyer A yet had to honor the existing CONTRACT. What if the transaction wasn't closing for 3 months so the property is off the market for 3 months but buyer A backed out a week before closing. The seller is entitled to keep the earnest money, depending on the verbiage in the contract, but now the house has been off the market for three months plus however long it takes to resell. The seller now couldn't buy a home that s/he was trying to buy and lost a job because he/she couldn't move because the buyer didn't close. The buyer's decision has caused a domino effect. If the contract states it, in this case it is the seller who has the right to sue for specific performance. Any Real Estate expert/guru should know this. Even though the developers didn't lose a job or a home, the same laws apply to this seller. In the case of the condos, nobody could have predicted that the market would change for the worse. Perhaps a buyer decided this price was no longer in their best interests. That shouldn't matter. A contract is a legal and binding agreement and the seller may be able to keep the earnest money but the buyer still breached a contract. However, to win a case, the seller has to prove damages. The bottom line, though, would be what is decided by the courts.
June 7, 2009, 8:52 pm
I'm not sure why you need earnest money explained to you since you are a licensed agent but I will comment. I see that you represent only buyers so I understand that you see it from the buyers' perspective. I work with both buyers and sellers so I'm not taking sides; I'm commenting on your predilection.
We know that earnest money is held in escrow to protect the seller in case the buyer breaches the contract. Since nothing is black and white and many scenarios can occur that can result in a breach, either party has the right to sue for actual damages (depending on the contract's verbiage) caused by the breach. The amount of the damages can differ, depending on the amount of loss. Nobody knows what that will be until the breach occurs so it may end up to be more than the amount of the earnest $. Since the same laws apply for new condos, resales, etc., here is just one example of why we have both earnest money and contracts:
Say that a seller had received a $10,000 higher offer from buyer B right after signing a contract with buyer A yet had to honor the existing CONTRACT. What if the transaction wasn't closing for 3 months so the property is off the market for 3 months but buyer A backed out a week before closing. The seller is entitled to keep the earnest money, depending on the verbiage in the contract, but now the house has been off the market for three months plus however long it takes to resell. The seller now couldn't buy a home that s/he was trying to buy and lost a job because he/she couldn't move because the buyer didn't close. The buyer's decision has caused a domino effect. If the contract states it, in this case it is the seller who has the right to sue for specific performance. Any Real Estate expert/guru should know this.
Even though the developers didn't lose a job or a home, the same laws apply to this seller. In the case of the condos, nobody could have predicted that the market would change for the worse. Perhaps a buyer decided this price was no longer in their best interests. That shouldn't matter. A contract is a legal and binding agreement and the seller may be able to keep the earnest money but the buyer still breached a contract. However, to win a case, the seller has to prove damages. The bottom line, though, would be what is decided by the courts.
June 8, 2009, 4:58 am
Alyse,I thank you for your comment, and perhaps I was not clear enough in my presentation of the facts, so I shall clarify. the standard purchase contract typically includes various conditions and/or contingencies which must be met for the contract to proceed. These may include the requirement that you make a good faith effort to obtain necessary financing or to sell your own property; or that the seller make certain repairs and provide good title. In pre-construction contracts, these conditions can be the delivery date or promise of certain amenities. If the seller does not meet these requirements, a buyer may be entitled to an earnest money refund.On the other hand, if the buyer breaches the contract, that buyer may forfeit their full earnest money deposit. The seller injured by the breach may also seek additional damages or try to enforce the contract by asking for “specific performance” (something that has never been upheld in the State of TN to my knowledge) where a court is asked to compel the breaching party to perform their promise-to purchase. Disclaimer: If your purchase contract does not close, you should consult your attorney over the remedies that may be available and that is exactly what is happening here.Also Alyse, you sound like a smart broker, don’t you advise your sellers to only accept an earnest money amount high enough to cover your sellers potential losses in the case the buyer does not perform? I am sure that you have had deals fall through in the past, and yet, I don’t think that you’ve ever helped your sellers sue a buyer for damages in a TN court of law. I can only assume that it’s because you advised your sellers correctly and only had them except offers with adequate amounts of earnest money.In most of the buyer initiated litigation the contention is that the seller either 1) never consummated the contract by not delivering the condo by the specified date or 2) the more philosophical argument over the existence of a true financing contingency. The latter argument offers this interesting thought: If the developer was willing to accept a 14 day financing contingency more than 2 years prior to the actual delivery of the project, how did the developer in good faith expect the buyer to provide such an item when no product existed on which to appraise or make formal application? In this case, no formal financing letter could even be produced. Also under this theory, the mere existence of the financing contingency lends to the developer’s understanding that buyers are going obtain traditional financing from and bank or lender in order to secure funds for purchase. It is with this understanding that the buyer and developer both chose to move forward with the contract and now the buyer cannot obtain financing through no fault of their own.But honestly, let’s put all of this aside for a moment and look at the entire situation. We currently live in a economic recession. Most of these buyers offered to try to work with the Bristol Development Group in good faith prior to not closing on their contracts (at least the buyers I have spoken with have done so). The West End project was completed more than a year ago and most of these contracts were resold to new buyers at that time. Why did the developer wait almost a year to file for damages? Why sue now just before they open a brand new building?
June 8, 2009, 4:58 am
Alyse,I thank you for your comment, and perhaps I was not clear enough in my presentation of the facts, so I shall clarify. the standard purchase contract typically includes various conditions and/or contingencies which must be met for the contract to proceed. These may include the requirement that you make a good faith effort to obtain necessary financing or to sell your own property; or that the seller make certain repairs and provide good title. In pre-construction contracts, these conditions can be the delivery date or promise of certain amenities. If the seller does not meet these requirements, a buyer may be entitled to an earnest money refund.On the other hand, if the buyer breaches the contract, that buyer may forfeit their full earnest money deposit. The seller injured by the breach may also seek additional damages or try to enforce the contract by asking for “specific performance” (something that has never been upheld in the State of TN to my knowledge) where a court is asked to compel the breaching party to perform their promise-to purchase. Disclaimer: If your purchase contract does not close, you should consult your attorney over the remedies that may be available and that is exactly what is happening here.Also Alyse, you sound like a smart broker, don’t you advise your sellers to only accept an earnest money amount high enough to cover your sellers potential losses in the case the buyer does not perform? I am sure that you have had deals fall through in the past, and yet, I don’t think that you’ve ever helped your sellers sue a buyer for damages in a TN court of law. I can only assume that it’s because you advised your sellers correctly and only had them except offers with adequate amounts of earnest money.In most of the buyer initiated litigation the contention is that the seller either 1) never consummated the contract by not delivering the condo by the specified date or 2) the more philosophical argument over the existence of a true financing contingency. The latter argument offers this interesting thought: If the developer was willing to accept a 14 day financing contingency more than 2 years prior to the actual delivery of the project, how did the developer in good faith expect the buyer to provide such an item when no product existed on which to appraise or make formal application? In this case, no formal financing letter could even be produced. Also under this theory, the mere existence of the financing contingency lends to the developer’s understanding that buyers are going obtain traditional financing from and bank or lender in order to secure funds for purchase. It is with this understanding that the buyer and developer both chose to move forward with the contract and now the buyer cannot obtain financing through no fault of their own.But honestly, let’s put all of this aside for a moment and look at the entire situation. We currently live in a economic recession. Most of these buyers offered to try to work with the Bristol Development Group in good faith prior to not closing on their contracts (at least the buyers I have spoken with have done so). The West End project was completed more than a year ago and most of these contracts were resold to new buyers at that time. Why did the developer wait almost a year to file for damages? Why sue now just before they open a brand new building?
June 8, 2009, 4:58 am
Alyse,I thank you for your comment, and perhaps I was not clear enough in my presentation of the facts, so I shall clarify. the standard purchase contract typically includes various conditions and/or contingencies which must be met for the contract to proceed. These may include the requirement that you make a good faith effort to obtain necessary financing or to sell your own property; or that the seller make certain repairs and provide good title. In pre-construction contracts, these conditions can be the delivery date or promise of certain amenities. If the seller does not meet these requirements, a buyer may be entitled to an earnest money refund.On the other hand, if the buyer breaches the contract, that buyer may forfeit their full earnest money deposit. The seller injured by the breach may also seek additional damages or try to enforce the contract by asking for “specific performance” (something that has never been upheld in the State of TN to my knowledge) where a court is asked to compel the breaching party to perform their promise-to purchase. Disclaimer: If your purchase contract does not close, you should consult your attorney over the remedies that may be available and that is exactly what is happening here.Also Alyse, you sound like a smart broker, don’t you advise your sellers to only accept an earnest money amount high enough to cover your sellers potential losses in the case the buyer does not perform? I am sure that you have had deals fall through in the past, and yet, I don’t think that you’ve ever helped your sellers sue a buyer for damages in a TN court of law. I can only assume that it’s because you advised your sellers correctly and only had them except offers with adequate amounts of earnest money.In most of the buyer initiated litigation the contention is that the seller either 1) never consummated the contract by not delivering the condo by the specified date or 2) the more philosophical argument over the existence of a true financing contingency. The latter argument offers this interesting thought: If the developer was willing to accept a 14 day financing contingency more than 2 years prior to the actual delivery of the project, how did the developer in good faith expect the buyer to provide such an item when no product existed on which to appraise or make formal application? In this case, no formal financing letter could even be produced. Also under this theory, the mere existence of the financing contingency lends to the developer’s understanding that buyers are going obtain traditional financing from and bank or lender in order to secure funds for purchase. It is with this understanding that the buyer and developer both chose to move forward with the contract and now the buyer cannot obtain financing through no fault of their own.But honestly, let’s put all of this aside for a moment and look at the entire situation. We currently live in a economic recession. Most of these buyers offered to try to work with the Bristol Development Group in good faith prior to not closing on their contracts (at least the buyers I have spoken with have done so). The West End project was completed more than a year ago and most of these contracts were resold to new buyers at that time. Why did the developer wait almost a year to file for damages? Why sue now just before they open a brand new building?
June 7, 2009, 9:58 pm
Alyse,
I thank you for your comment, and perhaps I was not clear enough in my presentation of the facts, so I shall clarify. the standard purchase contract typically includes various conditions and/or contingencies which must be met for the contract to proceed. These may include the requirement that you make a good faith effort to obtain necessary financing or to sell your own property; or that the seller make certain repairs and provide good title. In pre-construction contracts, these conditions can be the delivery date or promise of certain amenities. If the seller does not meet these requirements, a buyer may be entitled to an earnest money refund.
On the other hand, if the buyer breaches the contract, that buyer may forfeit their full earnest money deposit. The seller injured by the breach may also seek additional damages or try to enforce the contract by asking for “specific performance” (something that has never been upheld in the State of TN to my knowledge) where a court is asked to compel the breaching party to perform their promise-to purchase. Disclaimer: If your purchase contract does not close, you should consult your attorney over the remedies that may be available and that is exactly what is happening here.
Also Alyse, you sound like a smart broker, don’t you advise your sellers to only accept an earnest money amount high enough to cover your sellers potential losses in the case the buyer does not perform? I am sure that you have had deals fall through in the past, and yet, I don’t think that you’ve ever helped your sellers sue a buyer for damages in a TN court of law. I can only assume that it’s because you advised your sellers correctly and only had them except offers with adequate amounts of earnest money.
In most of the buyer initiated litigation the contention is that the seller either 1) never consummated the contract by not delivering the condo by the specified date or 2) the more philosophical argument over the existence of a true financing contingency. The latter argument offers this interesting thought: If the developer was willing to accept a 14 day financing contingency more than 2 years prior to the actual delivery of the project, how did the developer in good faith expect the buyer to provide such an item when no product existed on which to appraise or make formal application? In this case, no formal financing letter could even be produced. Also under this theory, the mere existence of the financing contingency lends to the developer’s understanding that buyers are going obtain traditional financing from and bank or lender in order to secure funds for purchase. It is with this understanding that the buyer and developer both chose to move forward with the contract and now the buyer cannot obtain financing through no fault of their own.
But honestly, let’s put all of this aside for a moment and look at the entire situation. We currently live in a economic recession. Most of these buyers offered to try to work with the Bristol Development Group in good faith prior to not closing on their contracts (at least the buyers I have spoken with have done so). The West End project was completed more than a year ago and most of these contracts were resold to new buyers at that time. Why did the developer wait almost a year to file for damages? Why sue now just before they open a brand new building?
June 8, 2009, 11:46 am
Grant, very fair handed response to someone attempting to appear smarter than she really is. I like the classy guru smackdown. Jim http://www.jimsweetwater.com
June 8, 2009, 11:46 am
Grant, very fair handed response to someone attempting to appear smarter than she really is. I like the classy guru smackdown. Jim http://www.jimsweetwater.com
June 8, 2009, 4:46 am
Grant, very fair handed response to someone attempting to appear smarter than she really is. I like the classy guru smackdown.
Jim
http://www.jimsweetwater.com
June 8, 2009, 1:04 pm
It was not my intention to issue a “smackdown”, only to fully explain my position in the post. I am my buyers’ full and complete advocate and will fight on their behalf until resolution or until the bitter end.
June 8, 2009, 6:04 am
It was not my intention to issue a “smackdown”, only to fully explain my position in the post. I am my buyers’ full and complete advocate and will fight on their behalf until resolution or until the bitter end.
August 8, 2009, 4:03 pm
August 13, 2009, 8:25 pm