Condo buyers sue Cosmopolitan alleging ‘numerous violations’

By Steve Green

Wednesday, July 14, 2010 | 4:18 p.m.

Another lawsuit has been filed by disgruntled purchasers of condominiums at the Cosmopolitan resort under construction on the Las Vegas Strip.

Attorneys said the latest suit was filed Wednesday in Clark County District Court in behalf of 220 individuals who purchased condominiums, but have yet to close on them.

"The complaint … charges the defendants with numerous violations, including reports that they have abandoned the condominium component of the hotel/casino, (and of) failing to disclose that fact to the remaining buyers," said a statement issued by the plaintiffs’ law firms Girardi & Keese and Lurie & Park.

The statement said the plaintiffs, "due to a complete stonewall of information from the defendants," are seeking injunctions:

-- Preventing the Cosmopolitan from renting out the plaintiffs’ condominium units to hotel guests.

-- To require the Cosmopolitan to make required real estate disclosures.

-- To prevent the Cosmopolitan from accessing the plaintiffs’ deposits now in escrow.

"We believe this latest complaint to be entirely without merit, and we will defend ourselves vigorously against these allegations," the Cosmopolitan of Las Vegas said in a statement about the suit. The $3.5 billion, 2,995-room resort is controlled by Deutsche Bank and is set to open in December.

"Many of the 220 unit purchasers of the condominiums claim to have been held hostage for five years while hundreds of thousands of dollars in deposits have been held by Deutsche Bank,” Shahram Shayesteh, lead counsel for the plaintiffs, said in a statement. “In addition, the defendants have sent letters to the plaintiffs demanding that they commit to close escrow on their units, in an attempt to bully plaintiffs into accepting partial refunds of their deposits, even though Deutsche Bank has failed to disclose even the most basic information about the nature of its condominium program."

In settling an earlier suit, the Cosmopolitan of Las Vegas in April agreed to cancel the sales contracts and pay substantial refunds to people who had signed up to buy 1,495 of its condo-hotel units.

Under that settlement, those buyers are to receive roughly 62 percent of their deposit money back, an average of more than $120,000 for each unit after attorney fees are paid.

Condominium buyers have complained in various lawsuits against the Cosmopolitan and other projects about delays in development of projects, that projects were not built with promised amenities and that during the boom years in Las Vegas, they were misled by overly optimistic sales pitches about rental income and the likelihood of price appreciation for their properties.

Many say that with the collapse of real estate prices, it doesn’t make sense for them to now close on purchases based on prices agreed to in 2005-2007.

Nevada Property 1 LLC, Deutsche Bank’s subsidiary that is developing the Cosmopolitan, said in a regulatory filing last month that the previous ownership had sold 1,821 condominium-hotel units.

Nevada Property 1 said it settled some of the earlier suits "based upon macroeconomic conditions in the real estate market, and clear feedback from the vast majority of purchasers that they did not intend to perform under the terms of their purchase contracts."

The filing by Nevada Property 1 last month said the earlier settlement could be undermined by additional threatened litigation.

"We continue to prudently evaluate the timing and composition of the ultimate condominium regime, dependent in large part on the actions of remaining purchasers," the filing said.