NASHVILLE, TN - 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's 161 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."
Source: Tennessean.com