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Seller Experiences Trouble With Builder

Ask the Real Estate Lawyer: Real Estate Law Q&A

REM #LAW 666

By Ilyce R. Glink and Samuel J. Tamkin

Summary: The reader is purchasing a new property from a seller who bought it from the builder for an investment. Now there is a problem with the builder. Ilyce and Sam explain that the buyer has no recourse with the builder and that they must deal only with the seller.

Q: We are purchasing a property that is just being completed. The seller bought into the development before it was constructed.
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The seller has the contract to buy the property from the builder. We planned on doing a simultaneous closing, where the seller would purchase the property from the builder and we would then immediately purchase it from the seller.

We had a closing scheduled, but at the last minute we were told by the builder that closing would be delayed a few days. The real estate agent that helped the seller and me with the contract told us that that there is a protected species of turtle in the neighborhood and that the builder didn’t do what he was supposed to about them. Apparently, the remaining certificates of occupancy for the sale of the rest of the homes are on hold.

We were “officially” told that the builder did what he was supposed to do with regards to the turtles, but we have found out that he hasn’t actually completed any work.

Do we have a right to take any kind of legal action against the builder in this matter, since we are not purchasing it from them directly?

A: In the most general terms, the answer would be no. Your seller – the investor/buyer – has the right to go after the builder. That investor/buyer’s contract may give the investor/buyer certain legal rights to sue the seller. In your case, you may have certain rights against the investor/buyer. You may be able to terminate the contract due to the investor/buyer’s inability to close on your contract.

You should talk to a real estate attorney about your situation. If the investor/buyer’s contract permits a resale of the property to you or anybody else, you may have certain rights that may flow to you by virtue of the investor/buyer’s contract. While these rights generally are harder to prove and, in many cases, these types of rights are disclaimed in most developer contracts, it may be worth a try.

Finally, you seem to be getting conflicting information about the status of the work that either has been done or needs to be done by the builder. You can try to call the agencies involved in overseeing the work that needs to be done by the developer.

You should start locally with the office or department that will issue the certificates of occupancy for your home. The person who heads that office may have additional information for you or may be able to advise you which other government office is reviewing the status of the work that needs to be done by the builder. With that additional information, you may be able to get a better status report and figure out what’s really going on.

With better and more accurate information, you can make a more informed decision as to what you will want to do. If the work is on hold due to environmental issues that will take some time to clear up, you may have to wait 6 months or a year until you can close, but at least you’ll have a better idea of the timetable.

If the builder has done some of the work, but is required to do more, you can try to estimate how long it will take. In any event, once you have this information, you can decide whether to wait and close, terminate the contract with your seller or take some other type of action.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website




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