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Friday, Aug. 15, 2008 | When the buyers at El Cortez signed stacks of papers to purchase their condos in fall 2004 and 2005, they signed a two-page item called a “repurchase addendum.” Buyers say it was marketed to them as a protection — if they had any qualms with the developer over the construction or design of the project, the developer would purchase their unit back at whatever the current market value would be.
They signed it in the heady days when appreciation in real estate seemed a sure thing. It seemed like a “satisfaction guaranteed” promise at a store.
“The way the real estate agents presented it, it was like a comforting thing,” said Barry Bruins, one of the first condo buyers at El Cortez and the president of the building’s HOA.
But now, its values have plunged and some individuals and the homeowners’ association in the building have filed a number of lawsuits, some of them related to the construction and design and planning of the building and the lot next door.
An attempt to turn that repurchase addendum around on at least one homeowner has failed, after a judge stopped the developer’s attempt to take back Bruins’ condo in a ruling issued last week.
Barry and his wife Deborah Bruins own a condo in the building, for which they paid $419,000 in fall 2004. They were among the first buyers in the building after it was converted to condos. In fall 2006, the Bruins added their names to the list of plaintiffs in a lawsuit against the Centre City Development Corp. and the developers, alleging fraud, breach of fiduciary duty and construction defects.
Since last summer, the Bruins have received letters from the developers threatening to invoke the repurchase addendum. That would force them to sell their condo back to the developers for $260,000, which the letters claimed was the current market value. The Bruins refused.
In March, the Bruins were served with a lawsuit. Attorneys for the developers argued that the Bruins had breached their contract by opening the dispute, and had further breached their contract by refusing to sell back their unit and by opposing the terms of the repurchase addendum.
The Bruins’ attorneys argued that the lawsuit was an attempt to stop them from exercising their First Amendment right to free speech.
“It’s about as oppressive a condition as you can imagine — we’re going to force you from your home,” said Everett DeLano, attorney for the homeowners. “In this economic market, it would, of course, mean that people would stand to lose money.”
Judge Ronald S. Prager found that the Bruins’ lawsuit against the developer fit within their constitutionally protected rights in a final ruling issued last Friday.
“The provisions of the Repurchase Addendum are highly unconscionable,” the judge wrote in his ruling.
He wrote that the contract was “oppressive” because it left buyers of the condos with no choice. In the frenzied real estate market of 2004 and 2005, buyers signed purchase documents and closed sales as quickly as possible. By the time buyers found the item in their purchase agreement, they knew that if they refused to sign the forms, their unit would be snapped up by another buyer, the judge wrote.
“Given the current condition of the housing market, Defendants argue that the forced sale of their home at a price far below what they bought it for in 2004 would cause them considerable financial hardship as they would be forced to come up with additional money to pay off the current mortgage on the home,” the judge wrote.
“The Repurchase Addendum creates a unilateral right of the Plaintiff which can only be enforced by the Plaintiff at its own discretion. These provisions are illusory and should not be enforced by the court,” he continued.
The attorney for the developers did not return calls for comment.
Attorneys for the Bruins have now filed a cross-complaint, hoping to extend the ruling to all homeowners in El Cortez, protecting them from the repurchase addendum.
The suit is one of a number of lawsuits associated with the trouble at El Cortez, the iconic downtown hotel-turned-condo building.