As always, reader’s comments with regard to contracts, legal matters and investments should always be seen as a potential starting point for a conversation with a qualified professional rather than as answers or advice. That being said, it’s a plugged-in reader that catches a potential lockup glitch in old Infinity contracts:
Regarding resale lockup and first right of refusal, there was a glitch in the contract that wasn’t caught until mid-2008. The sale lockup & builders 1st right of refusal is only 1 year COMBINED…not 1 year each. I know, because I caught the glitch.
The builder told everyone that it was 2 years (1 year for each) but admitted I was right. So everyone who signed a contract prior to mid-2008 actually only has a 1-year combined lockup & first right of refusal period… not 2 years. Although, I suspect none of them know it…until now.
∙ Infinity Tower Two: “Starting From The Mid $500,000s” This Weekend [SocketSite]
anyone care to share what the “right of 1st refusal” is? I’m not familiar with the developer contracts to the initial owners…. I assume the lock up is the period you have to wait before flipping… but what is “first refusal”??
It’s prudent to have an attorney give advice on contractual language rather than making blanket statements on 200+ contracts you have never even seen before.
Most of these documents are boilerplate. I know exactly what you are referring to and I am not saying you are wrong (or right).
I know there must be some attorneys out there. I was always curious what constitutes the unlicensed practice of law? i.e. Giving advice on a blog? Just curious.
No, stating your interpretation of contractual language on a blog is not unlicensed practice of law. And while I agree that it makes sense to consult a lawyer on many legal issues, it is not that hard to read a contract and interpret it, and 99% of the negotiations in the world over contractual obligations are handled without a lawyer.
“I know exactly what you are referring to and I am not saying you are wrong (or right).” … but I really, really want you to stop talking about it.
Real Estate agents/brokers are allowed to tread closer to unauthorized practice of law than any other non-lawyers. Actually, they do give legal advice in real estate matters, but are given a pass b/c of their specialized knowledge and training.
Compare to strip-mall “legal services” chains which are pretty closely regulated and, regarding contracts, should only be telling people where they could possibly check a box – Probably shouldn’t even tell people if they should or shouldn’t check the box.
And in my very limited court experience, clerks take great pains to avoid giving any advice at all — even clearly non-legal advice; like instead of “hey, you forgot to sign and date this form,” they say, “there may be a problem on page four of this document.”
diemos,
I’m just saying you most likely haven’t read my contract for my unit at the Infinity.
Even though it’s probably boilerplate, you should probably not give your interpertation of it without reviewing it.
In the past, many Socketsite posters have commented on properties without even looking at them and now Socketsite poster are going to interpert contractual language without looking at the individual contracts (even though they may be boilerplate)? That just seems capricious to me.
Paul
“Just boilerplate” is potentially the source of the problem. The whole point of doing a contract is to capture the specific intentions of the parties. Regurgitating old tracts of text is a great way to let typos and other errors slide into the document.
Writing it de novo isn’t a panacea either. Depending upon the situation a typist will mangle 7% or more of their keystrokes. This is especially troublesome when transcribing numbers. That’s why checks (and most contracts) will write a number in numerals and then repeat it in words.
Reading a contract out loud is best practice.
“Right of first refusal” means if the owner finds a buyer for their condo, the builder has the right to buy the condo at that price before the third party buyer. If the builder passes on the sale, then the condo can be sold to the third party. This clause would dissuade undervalued sales to family members or other individuals.
The fact that they changed it makes it pretty clear to me that at least THEY thought it was enough of a problem to change the contract.
The clause could also prevent sellers from agressivley competing with the Infinity Sales Team. If they try to hold prices at X, but sellers are willing to sell at 0.8X, then theoretically, Infinity could buy the unit and list it back at X, thereby giving them the power to hold prices to a certain level.
They wouldn’t do it for 0.99X, but they might do it for 0.8X, so if their pricing gets too far out of line with the market, that could be one tool they might use. And if you have hundreds of units to sell, you might very well use it for a while at least.
But here, it looks like the early units went out with at least an arguable problem for them. And those were the units most likely sold to speculators who would be the first out of the gate to sell.
The fortunate news is that the sellers really don’t need to care one way or the other. They can list it and sell it for the price they want, and then when they have an offer, take the offer to Infinity and see if they’ll match it. If so, sell to Infinity in the very same manner that you would pick one buyer if you got two offers. If it’s a problem to do that, an hour with a lawyer will clear that right up for $250. Either way, the seller gets his price and the market finds its price.
Were there deed restrictions at Infinity to limit sales within the first couple years? Liens against the property for the first two years which need to be settled if sold?
If not, isn’t the sales agreement settled at closing?
“That just seems capricious to me.”
You give your opinons in just as capricious a fashion Paul. All you need to read a contract is understanding of the English language. Telling people not to post their opinions is really annoying. I want to hear what people think and dont need you to censor this for me thanks.
You can’t interpret a contract without talking to the parties who signed it!!!!!!!!!
Interpreting a contract requires much more than reading it. If both parties understood it as one way and it is written another, frequently the understanding trumps the writing. My understanding is that many of the botched contracts followed prior written agreements that properly stated the restriction. I think anyone would be hard pressed to find a buyer who can say he understood there was only a 1 year RFR because of the language in the final closing documents.
The important take away is that interpreting a contract ALWAYS requires more than just reading it. Sure there was a time when the four corners of the document were the rule, but thanks to smart judges, that is no longer the case.
Plus, lets me honest, do you really think the builder is going to exercise its right and get more condos that it will have to mark down and sell . . . no!
The problem with Tishman’s RFR is that it gives them the right to cut the real-estate agents out of the deal by allowing them to buy the property for 6% less than the offer price.
How many agents will want to take that risk?
Will agents require their costs to be covered by the seller if the RFR is exercised?
What about the flood of short sales and foreclosures that are certainly coming? Tishman could make a killing buying distressed properties for 6% under the sale price. Or, maybe just increase its losses.
Finally, as a buyer, do you want to make an offer that is delayed 30 days while Tishman decides if it wants it for 6% less than you offered? Would you be concerned that the builder thinks you offered at least 6% too much for the property?
Interesting stuff
So, take it to a lawyer and find out before you list it.
You might want to remind the lawyer of these important legal issues (if I remember correctly from my business law course):
1. A contract will be interpreted against the party that drafted it; and
2. Form contracts that the other side had no real opportunity to modify are interpreted most strictly against the party that drafted it.
It’s not really tough to see how a contract that isn’t carefully drafted will be interpreted here: likely against Infinity if there is any ambiguity.
cooper,
I’m not giving legal opinions on contracts I’ve never seen before.
Moreover in the end the writing is only there to memorialize the contract (the intent of the parties).
I’m not disputing that you “understand english” or will come to the same conclusions as an attorney. What I am saying is:
1) It’s “capricious” to make statements about contracts (i.e. the one for my unit) you have never seen before even though they may be identical to the ones in your hands (how do you know this without checking first?).
2) The unlicensed pracrtice of law is unlawful.
I’m not trying to censor anyone, just giving an opinion (non-legal).
Paul
I don’t think anyone has to be worried about praciticing law simply by giving an opinion in an area normally reserved for lawyers opinion, so long as you are not represnting that you are in fact an attorney.
That said. A thread like this is great for the lay person who otherwise would not think an issue exists. This discussion certainly shows that there may be an issue in many peoples’ contracts that might allow them to sell without the RFR. So, that is step one, great!
Step two would likely be to call Tishman and ask if they will agree in writing to your interpretation of the contract. If they will not and you do want to sell, step three is to get an attorney.
Even after three years of law school most attorneys are not that good at interpreting contracts, so please don’t think that a good understanding of english or a few classes that had the word “law” in the title will bring you anywhere near close enough to understand the nuances that can be involved in determining the intent of the parties.
I personally as one of those that the advice helped (even if I do not plan to sell) really appreciate the original poster’s willingness to give us a head’s up. I wish that people on this site would not get so bent out of shape when people are just trying to help, they are not trying to qualify themselves as legal experts.
Just 2 more cents from an attorney who deals with big fights over a contract means all the time. I agree that if this clause might affect you (i.e. you want to sell and think the developer might point to this clause to interfere), then sure, talk to them and see if you even have a problem. But if this difference of opinion were to end up in court, what either or both parties say they thought the clause at issue meant is nearly 100% irrelevant. California law is clear that ALL that matters is what is printed on the page — and this is a decision of the judge not a jury. There are rare circumstances where the parties’ thoughts, prior negotiations, industry norms, etc. may come into play (way beyond what I’m willing to delve into here), but the “four corners” of the contract are nearly always the only relevant issue and someone’s “intent” is nearly always irrelevant and inadmissible.
Of course, the expensive legal battles arise when these rare exceptions do kick in.
Paul Said
“2) The unlicensed pracrtice of law is unlawful.”
Wow this is amazing. Just giving an opinion on a contract does not mean you are practicing law just like giving an opinion on real estate doesn’t make you a realtor.
I used to defend you on this site saying you were just a guy making a buck but wow.
Let me give you some PR advice on all your posts here–they are not enhancing your image. Either change the type of comments or like maybe not comment as much or on a different name. cuz wow–is all I gotta say.
Oh and that doesn’t mean I’m illegally practicing as a publicist.
What about the flood of short sales and foreclosures that are certainly coming?
Really? Do you know something we don’t?
“Moreover in the end the writing is only there to memorialize the contract (the intent of the parties).”
Paul, I’m not sure what your problem is with this thread. Sure, non lawyers should generally refrain from offering legal advice. But, hey, you are doing it yourself in the quote above. And, even worse, according to Trip you are wrong.
Seems like you’d prefer us all to be ignorant, but that’s no excuse.
I know this is off topic – forgive me, but it is still related to the Infinity.
Does anyone know if the noted assesment value for “full value” noted on property taxes, if and when shown lower than what the unit sold for = what the developer paid to build the unit or is it the assesed/appraised value of what the unit was actually worth at the time of building?
Would it be fair to assume that if the value was lower than the purchase price that it would be worth attempting to get one’s property taxes lowered assuming the value may have fallen back closer to the original assesment at this juncture?
Paul – Lighten up dude. You seriously think that making a comment on a blog about a set of contracts constitutes the “unlicensed practice of law”? That is about the most absurd comment I have seen on a blog. Hilarious.
Why don’t you take the disc with the contract that the Infinity gave you 2 years ago and post the lockup clause here and I will clearly point to the error in the first right of refusal definition.
“Really? Do you know something we don’t?”
Hundreds of buyers purchased assets now worth at least 30% less than they paid is the only thing I know. Combine that with the nonrecourse laws in CA and the tax break on loan forgiveness for anyone who is insolvent, and you will find that many of the buyers financial advisors will tell them it is prudent to short sell.
Trip,
Don’t forget the admission of evidence to vary the meaning of a contract that is otherwise clear when there was a mistake in contract formation. yeah yeah there are some issues re it being a form contract, but it is a risk here. It sounds like this was a clear mistake and no party expected the buyer to have the right to sell without a right of first refusal within two years.
In most cases I would bet on the builder on this one. Especially if prior contracts when the deposit was made stated the restriction correctly.
“nonrecourse laws in CA”:
IS this relevant for refis too?
Tom, no doubt there are all sorts of legal exceptions and troubles that the developer (who has the deep pockets) could throw out there. I was just addressing the commonly misheld notion asserted above that one always needs to talk to the parties and find out what they intended in order to interpret a contract. There actually is a state supreme court case you may have run across from the ’60s (Drayage), back when the Derrida school of language deconstruction was hot, stating essentially that one can never really know what mere words mean, etc. But that did not last long. (Although I still cite that case anytime I want to argue that a contract does not mean what the written words plainly state).
gowiththeflow: “‘nonrecourse laws in CA’:
IS this relevant for refis too?”
My layman’s understanding, which is in no way legal advice or a legal opinion, or to be construed in any way as practicing law, is that if the refi is just a refinancing of the “purchase money” then it is still covered but if you do a cash back refi you may not be fully covered by the norecourse protection anymore.
Hundreds of buyers purchased assets now worth at least 30% less than they paid is the only thing I know. Combine that with the nonrecourse laws in CA and the tax break on loan forgiveness for anyone who is insolvent, and you will find that many of the buyers financial advisors will tell them it is prudent to short sell.
Just what I thought–guesswork and speculation.
Don’t forget the admission of evidence to vary the meaning of a contract that is otherwise clear when there was a mistake in contract formation.
I was talking with a real estate “pro” a few years ago, and somehow we got to talking about contract construction (this was in relation to rental agreement forms, but the general point is the same).
This guy kept talking about something and lecturing me, so I finally asked him to spell it. The lawyers can guess the punchline: the “P-A-R-O-L-E” evidence rule, lol. A little knowledge can be dangerous.
I agree with cooper and Trip: read the contract. As long as it’s reasonably clear, the developer will have a very tough time trying to argue “intent” or “course of dealing”/”custom” to the detriment of a purchaser, when the words say otherwise. Most ethical lawyers would advise them so, I bet.
Here, I’m cutting and pasting from a good opinion that spells out the rules on interpreting contracts in court — edited to delete citations, and note the word “parol” (of course, applying these already complicated rules is even more complicated — now you can see why you need a lawyer for everything):
When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible. The language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity. The cardinal requirement in the construction of deeds and other contracts is that the intention of the parties as gathered from the four corners of the instrument must govern.
It is only if the Court determines that the plain language of the contract is not clear and explicit that any further consideration is necessary: [T]he first question to be decided is whether the language is ‘reasonably susceptible’ to the interpretation urged by the party. If it is not, the case is over. Only if the Court determines the plain language is ambiguous and that it cannot resolve from the writing itself whether the language is ‘reasonably susceptible’ to the interpretation urged by the party does the Court—not the jury—then consider extrinsic evidence of the parties’ intent. Extrinsic evidence can include the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent conduct of the parties. If the Court reaches beyond the plain terms of the writing, the court must conduct a hearing out of the presence of the jury and permit the parties to introduce conditionally or subject to a motion to strike” extrinsic evidence of the meaning of the term in question. The Court then considers the extrinsic evidence to ascertain the meaning of the written term and the intent of the parties. It is only if the extrinsic evidence is relevant to prove the proposed meaning and the credibility of the proponent’s parol evidence is disputed that the issue of the credibility of disputed extrinsic evidence—and that issue only—gets presented to the jury, with the interpretation of the agreement always a question for the Court.
Just what I thought–guesswork and speculation.
anon
Anon- 9E at the Infinity, and what’s happening at buildings like The Palms and ORH, should be all the evidence you need of the coming onslaught of short sales at the Infinity. Everyone who sells in the next 1 to 2 years (and maybe 5) will be selling for a lot less than they paid.
Are you seriously disputing that? 9E asking $799k will be lucky to sell for $700k and I have to imagine they paid at least $800k when they bought.
Trip – Great postings of irrelevant legal jargon. Here are the RELEVANT facts. The contract language on the lockup & first right of refusal for contracts prior to mid-2008 define the period of 1 year combined. There is no confusion in the language. If I had the contract with me, I’d post the language and you’d see what I refer to. The only reason people thought it was 2-years was because the sales office agents told people so while referencing their contract notes. When I asked if the sales agent actually read the clause in the agreement, the answer was “NO”. So who wins here… the buyer who says they read the contract and signed it knowing the period was 1-year total or the builder who relies on a sales agent who promotes a 2-year period but never read the agreement? I side with the buyer.
“9E asking $799k will be lucky to sell for $700k and I have to imagine they paid at least $800k when they bought.”
sfrob – According to the SS editor #9E was “Asking just under $900,000 (not including upgrades) when the sales office first opened (acording to a plugged-in Infinity resident).”
Hence, buyer probably didn’t purchase for less than $900k, given that opening day prices were raised from early 2007 to around mid 2008. With upgrades, the cost basis may be higher.
Reading a contract out loud is best practice.
Which is why in Germany, all RE contracts require a notary an independent party who actually reads the contract outloud — completely to both the buyer and seller before they sign…
OMG now I am illegally practicing German law…what a hoot to read this thread…