The practice of developers fudging their sales numbers may come back to haunt Milbank Real Estate, the local developer behind Roosevelt Lofts in downtown. Eight buyers who put down deposits at Roosevelt Lofts filed a lawsuit against Milbank yesterday in Los Angeles County Superior Court, alleging among other things that the developer misled buyers into thinking more units had been sold than was actually the case. The lawsuit seeks damages, including punitive damages for fraudulent misrepresentation. Given all the questions about Roosevelt Lofts, a 222-unit adaptive reuse project at 7th and Flower, the lawsuit isn't entirely surprising. UPDATE: Download the lawsuit here. It's a 29-page PDF.
---According the lawsuit, filed by legal firm McKenna Long & Aldridge LLP, eight buyers paid a collective $342,246.00 in deposit funds to move into the downtown building. In one case a buyer purchased a condo for $823,609.00, paying a deposit of $82,360.90. Of that, $41,180.50 was subsequently refunded, but $41,180.40 remains in escrow, according to the suit. None of the deposits belonging to the eight buyers have been returned.
---Six of the plaintiffs who put down deposits in summer 2007 were told by sales staff that the development was 50 percent sold out. Those buyers were told they would be able to move in November 2007. Additionally, two buyers who put down deposits in December 2007 were told they could move in January 2008. The Roosevelt has seen no closings to date.
---One specific legal point that McKenna Long & Aldridge’s lawyers argue: Escrow must close within 10 days from the date that the seller advises the buyer that it has obtained a certificate of occupancy. On December 11th, 2008, Milbank sent a mass mailing, indicating it was in receipt of TCO. However, escrow failed to close. If escrow doesn’t close within 30 days that the buyer has the right to get their deposit back. And in one case, a buyer suffered financial losses because he was doing a 1031 exchange, meaning it was time sensitive buy.
----There may have been violations of certain laws in how they conducted their sales program, according to the suit. Specifically, lawyers for McKenna Long & Aldridge LLP believe that the Subdvivded Land Act (designed to protect consumers) and the Federal Interstate Sales Act, may have been violated.
---In a bit of irony, Bill Pham, partner at McKenna Long & Aldridge LLP, tells us that his firm usually represents developer, not buyers. “But these buyers are in such a stressful case?some of them aren’t sleeping..We were able to determine they had these rights.”
---Calling Milbank, we were told the company's legal counsel was in court today. A message was left.