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Contracts for homes have clause for concern

The deals for their new townhomes were signed, and all they had to do was wait for them to be built. But then the rules were changed.

Published February 5, 2006

TRINITY - With the kids grown, 53-year-old James Stanton was ready to downsize. He was tired of cleaning the gutters, taking care of the pool and trying to get the grass to grow around his four-bedroom home in Palm Harbor.

One Sunday afternoon, he and his wife passed a billboard advertising the Townhomes at Cypress Walk, to be built among preserved woodlands in southwest Pasco County.

They went to see the project's developer, 49-year-old Steven Ross Gordon. He told them he would build them a beautiful home, Anne Stanton says, "and I just believed."

Had they checked him out, the Stantons would have found that during the 1980s in Pinellas County, Gordon's businesses faced multiple foreclosures and lost at least two dozen breach-of-contract lawsuits. They would have found dozens more that were settled or dismissed.

But, knowing none of this, the Stantons sold their home and moved into an apartment. They agreed on a price of $137,200 for their new townhome. And on April 11, 2004, they signed a contract.

Seventeen months later, the Stantons still had no townhome. What they had was a letter from Gordon. It said he would not build them the home for the price on their contract. But he would build them a different one - for about $35,000 more.

The Stantons were not the only ones to receive the letter. Gordon says 23 other buyers were in the same position.

"I've got the right to do it," Gordon told the St. Petersburg Times last month. To prove it, he pointed to a clause in a contract, "which clearly states," he said, "that the builder reserves the right to improve his product."

One problem. The clause is not in the contract that the Stantons and the others signed.

* * *

Cypress Walk "has been delayed for more than a year due to factors out of our control," Gordon wrote in that letter of Sept. 6, 2005. Meanwhile, cost increases had forced him to redesign, he said.

Gordon gave each buyer several options. In the Stantons' case, they could (a) pay $197,781 for an improved version of the townhome they contracted for, (b) pay $172,725 for a home similar to what they contracted for, but bigger, and at the far end of the complex, or (c) get their $5,000 deposit back with 12 percent interest.

Gordon puts it this way: Those who signed the early contracts were buying Chevrolets. But now he's selling Cadillacs. If people want them, they're going to have to pay for them.

"I'm not Santa Claus," Gordon likes to say. "We don't give people things for free."

Fourteen early contract signers came around to see it his way, he says. Ten, including the Stantons, are holding out. Of these, Gordon predicts half will buy on his terms once they see the finished product.

"The other half of the 10," he says, "I don't care what they do."

Gordon says that the Stantons, while they must pay more than they contracted for, still are getting a deal compared to current prices.

The Stantons say they already had a deal. And while they've been waiting for him to build their townhome, they estimate, the value of the house they sold has risen by $150,000.

* * *

Gordon's September letter to buyers pointed out that, in March 2005, he made changes to Cypress Walk's condominium documents filed with the state.

"One of these changes gave us the right to improve our quality and change our features," the letter said, "and charge existing customers for any change made after their contract was executed."

But Gordon's letter left out something important: That the change he made was to the sales contract itself. A developer is entitled to change the Declaration of Condominium, which mostly covers things such as maintenance responsibilities and restrictions on pets. An already signed-up buyer may either accept the change or cancel the contract. But the contract itself, which is also included within the book of condominium documents, is another matter entirely.

"Once a contract is signed, the developer absolutely cannot unilaterally change the terms of the contract," says Eric M. Glazer of the South Florida law firm Glazer & Associates, which concentrates in Florida condominium law. "A contract is a contract is a contract. It cannot be changed without the express consent of both parties."

Darryl C. Wilson, professor at the Stetson University College of Law, agrees.

"He certainly can't just unilaterally change terms to his own liking," Wilson said, "and expect everybody to be bound by it."

* * *

Also included in Cypress Walk's condominium documents is a short profile of Gordon.

"Mr. Gordon has 20 years experience in land development," it says, "and has built and delivered over 450 homes."

Actually, before Cypress Walk, Gordon had six years of experience in land development and home building, from 1982 to 1988. During that time, his business ventures were ordered to pay judgments in more than two dozen lawsuits. Many stemmed from unpaid bills. One couple who did electrical work for him won a $128,459 judgment in a 1985 lawsuit that alleged fraud. Many of the other lawsuits were for much smaller amounts, and Gordon says they are insignificant in light of the millions of dollars in business he was involved in. By 1989, none of Gordon's businesses were selling homes any longer.

In 1991, Gordon started International Environmental Solutions, a business that makes faucet valves. Gordon has been its president ever since.

Gordon's most recent land development venture began in 1999, when he made a deal for the land of Cypress Walk.

Asked how he can claim 20 years of land development experience, Gordon says he doesn't think the statement was misleading.

"I never really formally left the business," he said. "I didn't have projects going on, but I didn't leave the business."

* * *

"Permitting issues, site development issues and last summer's four hurricanes made it impossible to deliver our townhomes on our original timetable," said Gordon in his September 2005 letter.

But asked by the Times last month to specify the permitting and site development issues, Gordon said his project has not faced any since the first contracts were signed. That leaves the hurricanes. But some of those kept waiting suspect other reasons.

"It can only be two things in my opinion," says Elias Medina, who like his son Elliot is one of the holdouts. "It can be incompetence, or lack of money."

The project has had some financial troubles. In 2002, a lender foreclosed on the land to collect a $1-million note. As the property was headed for auction, Gordon's corporation filed for bankruptcy, which stalled the sale. This gave Gordon time to secure other financing, pay off the note, and keep the land.

In September 2004, another lender threatened to sue for a $665,000 loan. Gordon's corporation paid the loan before the threatened lawsuit began. He says none of these problems contributed to construction delays. And the improvements he has made on the planned 141 townhomes, he says, will make them "the premier townhome community in this whole region."

* * *

In December, Gordon sent the Stantons and the other holdouts another letter, along with a copy of his latest book of condominium documents, and an acknowledgement form offering two options.

The first was to "accept these documents as provided, agree to abide by the terms and conditions contained therein and acknowledge that your legal relationship with Cypress Walk Developers is governed by and subject to these documents without regard to the date of your purchase contract."

The second choice was to take back their deposit and go away.

"That's an amazing paper that he thinks somebody's just going to sign," says holdout Carol Goldstein. "Unless he can somehow fool us, or coerce us, or he thinks we're idiots."

Goldstein and others have filed complaints with the Florida Department of Business and Regulation and Pasco County Consumer Affairs. The Stantons, meanwhile, have bought and moved into another condo. But they still plan to buy the one they contracted for with Gordon.

"I'll buy it and then I'll turn around and sell it," Anne Stanton said. "I'll never have anything to do with Steve Gordon." And she plans to sue him over it if that's what it takes. But Gordon doesn't seem worried.

"If these people are really unhappy, they can take me to arbitration, which this requires," he said, tapping the new book of condominium documents.

He was referring to a clause in the sales contract that forces buyers to settle disputes with arbitration rather than lawsuits.

One problem. That's another clause he added after the Stantons and the others signed.

[Last modified February 5, 2006, 01:23:11]

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