Developer's Rights In An Assignment
I have recently entered a contract (June), putting 10% down, to purchase a lot in a small subdivision in Florida. The contract is assignable, but the assignment must be approved by the developer and he may approve or decline at his sole discretion (language from the contract). The approved Assignment Agreement received today requires the assignee to put 10% down, to be placed in escrow until closing. If the assignee then defaults, the 10% will go to me. If I default as well, the 10% goes to the developer - so he would have a total of 20%.
It is my understanding that assigned contracts do not need the permission of the original contracting person (the developer) with the condition that no new obligations are placed on the developer. With that understanding, I went forward with the deal expecting that assignments would be approved if not detrimental to the developer.
Yet, in this case, the developer will benefit from my assignment of the contract. I can understand that the developer should be compensated my original 10% if I fail to close on the property, but this seems very questionable that keeps not only my down payment, but the assignees as well. It appears that he is trying to interfere with a contract between me and a third party and this interference could cost me.
Can the developer do this?
I have an offer on the table to take the assignment for 50% more than my purchase price, but the buyer will likely will not put down anymore than 10%.
Does the developer have the legal right to require the assignee to put down 10%, in escrow, that would ultimately go to him in case of default? Does the developer have the legal right to to interfere in a contract between me and a third party, that is not detrimental to him?
In short yes the developer do this. You and the developer signed a contract and you did agree to these conditions. If you had a problem with it you should have modified the purchase agreement.
That being said--I belive you can accomplish what you are looking to do is with a double closing. You have a purchase agreement to buy the property and you sign a purchase agreement to sell the property. All of these documents go to the title company and everything goes.
Some lenders have title seasoning requirement; meaning that the same owner must have owned the property for a certain period of time before they will lend on it. This shouldn't be a problem considering this is new construction but you may have to have your end buyer shop lenders.
Another way to avoid this issue is to seller finance the property using a note and sell the note on the secondary market at closing. This technique requires a note buyer.
There are more lenders that have no seasoning requirements than there are with seasoning requirements so you shouldn't have too big of problem.
I'm no pro but I've never had a lender even question financing a property because of seasoning. I think the issue is more location based.
GOOD LUCK