Some Argue That Developers Violated Securities Laws; Looking for a ‘Smoking Gun’

Desperate to recoup money paid to acquire condominiums in hotels, buyers from California to Florida are trying to use the courts to get their money back, arguing that condo-hotel developers violated securities laws when selling the units.A few years ago, condo-hotels seemed like a great idea. Hotel developers could offset construction costs by selling rooms to individual buyers, then share the rental income with the owners every time a room was booked. However, instead of the lucrative venture some buyers claim they were promised by developers, condo-hotels have turned out to be one of the worst investments in decades.The industry is getting hit on two fronts: The condo crash has wiped out the value of many units, and the hotel bust means the rooms are being rented only infrequently and at much lower rates than anticipated.
By David Graham, August 5, 2009, WSJ

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