Buyers and Builders File Lawsuits, Hope to Ditch Contracts

With the ebb in real estate cash flow, insiders are turning to lawsuits — builders, subcontractors and Florida mortgage borrowers are suing each other to get out of contracts or simply to get paid.

The number of lawsuits filed in Lee County civil court — those for claims above $15,000 — has increased so far this fiscal year about 20 percent from the same time last year, while suits have increased 50 percent in county court, for those less than $15,000.

“A lot of people are tremendously upside down right now,” said real estate attorney Kevin Jursinski. “Everybody’s saying, ‘Help me, I want to get out of it.’ ”

Builders are suing potential home buyers for backing out of deals. Subcontractors are suing builders for not paying them. Former partners are even suing each other.

The wave of lawsuits vary, but all reflect the tough times industry players have fallen on, turning to courts to stay alive.

The median price of an existing single-family home in Lee County has fallen from an all-time high of $322,300 in December 2005 to $283,200 in April, according to the Florida Association of Realtors. Meanwhile, the number of homes on the Florida housing market has quadrupled to about 15,000 as single-family home sales have spiraled down, from 1,084 in December 2005 to only 573 in April.

While Lee County Clerk Charlie Green said he can’t say the increase in lawsuits is attributed solely to unhappy builders, buyers and subcontractors, they are definitely a factor.

“When the economy slows down, people’s income slows down,” he said. “The $1,000 that didn’t seem important then suddenly is important.”

Lawsuits
The lawsuits are piling up on the second floor of the Lee County Justice Center and many companies are feeling pressure from attorneys.

“We’re in an environment now that I’ve never seen,” said Fort Myers attorney Richard Johnston Jr., who represents Cape Coral-based Caribbean Custom Homes.

Johnston said he will soon be filing a petition for a court-supervised dissolution because the six-year-old Florida mortgage company can’t stay in business. The company, headed by Jason McGillicuddy, is named as defendant in 35 lawsuits and another 20 liens. The plaintiff in one of those lawsuits is George Bezanson of Cape Coral, who until November was a partner with McGillicuddy.

Bezanson, in construction for 30 years, said he joined McGillicuddy in 2003 with McGillicuddy handling the financial side of the business. But during the real estate boom, the business took on too many projects and became overextended.

In November, Bezanson quit the business, saying in his resignation letter he made the decision because of untruthful communication, financial misconduct and misrepresentations by McGillicuddy as to the financial status of the corporation.

Now, he’s filed two lawsuits. In one, he wants to get paperwork as well as tools and materials he said he used on the job but McGillicuddy has kept. In the same lawsuit, he is suing his former partner for fishing rods, a grill and floats. McGillicuddy argues the tools are property of the company.

In another lawsuit, Bezanson wants to dissolve Caribbean Holdings of Florida, a corporation he said was designed to fund their business.

“Caribbean wasn’t paying the bills,” he said. “If you have the money, the subs show up. If you don’t have the money, the subs won’t work for you.”

Filing liens
It’s not just owners and builders fighting in the courts. Subcontractors often file liens on property that builders are working on so the builders can’t get paid by the bank.

Richard Friday, chief financial officer for Youngquist Brothers, a well-drilling company, has filed 293 liens, according to the Lee County Clerk’s website.

“We have a very simple philosophy,” he said. “We do absolutely great work. If there’s a problem, we fix it, and we want to be paid.”

Friday said the increase in business in the Southwest Florida housing market has brought in more subcontractors and builders from outside the area.

“We’re in a world of strangers. You don’t know who you’re dealing with,” he said. “When cash flows are there, people will pay. When it’s not there, people have to make choices.”

SOURCE: The News-Press