Buyers of WCI Communities tower units have come up with a novel way to try to get their money back from investments they saw plunge in value between the time they signed contracts and closed on thier units. A group of buyers at one development claim WCI violated federal securities law.
In a purported class-action lawsuit filed Jan. 23 in federal court, buyers of hotel condominiums in the company's The Resort at Singer Island in South Florida are asking a federal court to rescind the sales and give them their money back with interest, alleging the company violated the Federal Securities Act of 1933 by not registering the offering of the hotel units with the Securities and Exchange Commission.
The lawsuit alleges that WCI required the buyers to sign "Hotel Rental Management Agreements" which it says are investment contracts and thus subject to the registration requirements of the securities act.
"The definition of a security includes such things as investment contracts," said James Wallace Beasley Jr., an attorney who is representing the buyers. "There is a difference between purchasing a single-family house you want to live in yourself and investing in someone else's project... . People who bought these units bought them primarily as an investment because they thought they were going to make money from the rental of these units."
WCI denied any guilt on Friday (Feb. 1). "The Company and RSI (Resort at Singer Island) believe that the charges are without merit and intend to vigorously defend themselves."
The Resort at Singer Island consists of 239 hotel condominium units, which range in size from 700 square feet to 2,100 square feet and in price from $400,000 to $2 million.
The hotel condominium buyers at Singer Island are not the only purchasers of WCI units to exhibit buyers' remorse as the market crashed during the long construction periods required for their units. The company's cancellation rate has climbed from the low single digits to the high double-digits over the past 18 months, wrecking havoc on its revenues.