As a San Diego real estate lawyer I saw a lot of American developers flocking to Mexico’s Baja coastline during the real estate boom to build luxury condos – most of these projects were geared to American purchasers. Buyers were told that the developments were a rare opportunity to purchase relatively inexpensive beach front property. But they were not, for the most part, told that most developers had not obtained the financing they needed to complete their respective projects in advance of starting construction and selling units. A few of the developments got off the ground, but without the financing you’d need to get to the finish line they ultimately suspended construction indefinitely, or folded entirely.
You’ve likely heard that real estate mogul Donald Trump got caught in the snafu. According to a Los Angeles Times report on a recent settlement, the proposed “Trump Ocean Resort” was a planned luxury high-rise with a “panoramic view of the Pacific Ocean, swimming pools, tennis courts and fine dining[.]” (Read it here: LA Times/Trump Article). When the project failed, purchasers quickly learned that Mr. Trump was not, in fact, the project’s developer, but had instead licensed the use of his name for half a million dollars to two ambitious developers. According to the Times, the developers have settled with their buyers for $7.25 million. Claims directly against Mr. Trump appear to be still pending.
If you invested in a Baja development, the frustration is understandable. Many American purchasers – who were wary of the potential risks involved with purchasing property in Baja – took efforts at the outset to ensure the safety of their deposit funds. We have litigation pending against a development on the Mexican coast that told prospective buyers (our clients) that their deposit funds would be paid to, and held by, a licensed escrow company for the duration of construction. When the project stalled our clients tried to retrieve their deposit funds – only to find out that their money had long since been transferred out of escrow and spent on construction.
Hopefully you’ve avoided this real estate mess – but in the event you’ve found yourself in a similar predicament, give us a call to vent and discuss your potential claims.
by Rebecca L. Blain