This Florida couple signed a contract 2 years ago to buy a $450K house under construction. The home is done — but now the developer wants $200K more because the value went up. Legal or not?

Delays aren't the only problem with new construction

Delays aren't uncommon in the context of new residential construction. There are a host of factors that can cause a new home build to take longer than planned.

For one thing, municipalities might take their time issuing the right permits, and there can be backlogs for getting inspections throughout the construction process. Developers can also experience delays getting their hands on the right materials.

Construction Dive reported in February 2024 that despite being four years out from the start of the pandemic, builders are dealing with ongoing shortages of materials. Weather-related delays can also cause a new home build to take longer than anticipated.

But there's a big difference between modest delays and a two-year delay. Matthew told WSVN-TV that during that lag, he called the developer repeatedly.

"Days and weeks would go by and we wouldn't hear back,” he said. “We would drive by the property periodically and we would see that nothing was going on. It was still just barren land."

After about two years, work on the home began. Once the shell was up, Matthew asked the company if he could come see the house and was told "no problem." But when he showed up, he was told to leave and was threatened by a supervisor to get out.

Following that experience, he wrote an online review calling the company "terrible" to do business with. He was then contacted by the company letting him know that his contract had expired, and that they'd be willing to reopen negotiations to purchase the property at its current market value of $650,000.

Matthew referred back to the contract, but didn’t see an expiration date anywhere.

Regardless, he and Natalie can’t afford to spend beyond the $450,000 purchase price they initially agreed on.

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Know your rights

Howard Finkelstein is a legal expert and the voice of reason behind the "Help Me Howard" feature on WSVN-TV in Florida. He says that while the Fundoras' situation is challenging, they're not out of luck.

"Their contract is still valid because it does not expire and it does not prohibit posting a review on social media," Finkelstein said.

He also explained that if construction costs increase, the builder can raise the price of the home by up to 6%, or $27,000 — but not by $200,000. Keep in mind, the laws here can vary by state and by what’s specified in a contract.

The developer's attorney said nothing about an expiration date but claimed Matthew breached the contract by trespassing based on the part of the contract that stated the buyer had to schedule a visit five days in advance. Finkelstein said this wouldn't be classified as a material breach, which means it should not render the original contract invalid.

He didn't mention whether the Fundoras had been paying rent during the years they should have been able to occupy the new house and start paying down a mortgage.

If there was nothing written in the contract to permit a late build, the couple could potentially have recourse against the builder for that added expense. But Finkelstein didn’t comment on whether that applied to their situation.

Of course, now that the house is ready, the Fundoras are in limbo because they can't afford the new purchase price. They can't sue the developer because of the terms of the contract, but they can arbitrate — which may be a quicker and cheaper alternative that would likely offer the same outcome.

Finkelstein thinks it's likely that Matthew would win this type of dispute, but there's no guarantee.

The developer has agreed to return the deposit if the Fundoras walk away. So now, they have a tough decision to make.

If you find yourself buying new construction, it's important to have an attorney review your contract to make sure there are no hidden traps.

According to Alper Real Estate Group, a contract with a provision known as a material escalation clause — which allows your builder to increase your home's purchase price if its costs come in higher than expected — could really throw your budget off track. So it's important to know what rights you have, and what rights your builder has.

It's also important for a home construction contract to specify exactly what deliverables are included so there are no surprises.

For example, it should expressly state what materials are going to be used in various parts of a home, what appliances your builder will provide and so forth. The more detail there is, the more protection you’re likely to get.