The following article was written by Chas Sisk and was published in The Tennessen on 2/18/2009:
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“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.”
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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.”
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