Lennar must pay $114 million, in addition to default interest and fees, to real estate investment trust iStar after a federal appeals court upheld a 2015 U.S. District Court decision requiring the homebuilder to complete a 2005 land deal, HousingWire reported.
The ruling pertains to a 1,250-acre deal in Prince George’s County, MD, a contract from which the builder attempted to get out of through a 2008 lawsuit alleging the sellers withheld that the property had been a disposal site for sewage sludge, according to the South Florida Business Journal. Lennar was ordered to pay for the land, and the latest news is the result of its appeal.
As a result of the decision, the builder lowered and restated its first quarter 2017 earnings, MarketWatch reported, applying $140 million toward the related litigation.
Lennar entered into the Maryland land deal just before the start of the housing crash. Land deals were key to helping big builders survive the recession, The Wall Street Journal reported in 2009.
Among those in on the action was Lennar, which sold off some high-risk land and turned to joint ventures for additional land purchases right before the crash, The Journal noted. Builders generally targeted inexpensive land during the recession while collecting tax rebates on the calculated losses from their pre-crash sales.
Today, land availability is a constraint on housing recovery nationwide. In October 2016, Builder magazine reported continued strength in lot demand but considerable shortages of buildable lots. Regulations preventing high-density residential construction are one reason for the disparity, according to the publication.
Competition is driving down the size of lots, which could make room for more housing units. The National Association of Home Builders reported that in 2015, lot size fell below 8,600 square feet, the smallest since the Census Bureau Survey of Construction began tracking the figure. And recent analysis by CoreLogic found that builders are putting up larger homes on smaller lots to meet demand in some corners of the market for more square footage while keeping their own property development costs down.
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