Georgia Law Allows Certain Residential Condominium Buyers to Back Out of Contract

As everyone is aware, one of the hardest hit industries in the current recession is the real estate industry. Within that industry, one of the hardest hit markets is the residential condominium market. The media has flooded us all with stories of entire condominium buildings remaining unsold and eventually being foreclosed upon by the development lender. This is true in Georgia a well. With the inevitable boom in residential condominium sales that is likely to manifest itself following the end of this current recession, it’s always wise to become familiar with or refresh ourselves with the laws governing residential condominium sales. In Georgia, condominium sales are primarily governed by the Georgia Condominium Act, O.C.G.A. §§ 44-3-70, et seq. 

Under the Georgia Condominium Act the “first” bona fide buyer (e.g., the initial buyer who pays a fair market value) is entitled to certain information, including the floor plan, the declaration, the articles of incorporation and bylaws, and other documents by the time the contract is entered. Absent receipt of these materials, such “first” bona fide buyer of a residential condominium may rescind the transaction, even after signing a purchase contract and delivering the earnest money. 

The interesting question in today’s market is whether a buyer from the lender who foreclosed upon the developer is a “first” bona fide buyer. The Georgia Condominium Act does not define the “first bona fide sale.” With so many condominium units poised to flood the market it is foreseeable that lenders in their rush to sell units will overlook or fail to comply with the law. Likewise, it is equally foreseeable that buyers who find a better deal will seek to rescind contracts they’ve already entered. For real estate litigation attorneys, the full employment act for lawyers will remain robust.