Las Vegas condo owners sue developer

Just like the rest of the real estate market in the Entertainment Capital of the World the condominium sector has fallen on hard times. Units for sale are sitting unsold for months on end and prices are dropping. That makes a lot of owners nervous, especially those who are in it as investors.

A group of them at the Signature, the MGM Mirage - Turnberry Associates condo-hotel project with three towers, has decided to sue the developer for fraud, for selling them high-rise units that are unprofitable. Yes, that is the reason for the legal action. Unprofitable condos. Disputes typically arise when deposits are paid and then the project fails to get off the ground or when the building opens with material defects and missed features. As is evident, this particular grievance is rather unusual.

According to the complaint, the developer enticed them to purchase condominiums that would bring net profits when they are rented out, in addition to the potential for appreciation. In this setup the owners would have a management company rent their units to visitors when they are unoccupied. But for many owners rental incomes haven't even been enough to cover the underlying mortgage payments and high maintenance fees, much less bring a profit, and they feel exploited.

On the surface it appears to be very difficult to prove that the developer is at fault. The profit assurance assumably wasn't included in any written contracts, so what promises the sales agents orally made is hard to establish. It really is the investor's responsibility to do his homework before signing anything and if the market turns, like it has now done, it's just part of investing, and also a learning experience. Seeking help for a questionable business decision making from the courts is stretching it.

Photo by Steve Marcus