Real Estate News

Trump Being Sued Over Mexico Condo-Hotel Project


Trump Ocean Resort Baja

(BAJA, CALIFORNIA) -- A lawsuit filed Monday by a group of buyers who lost their deposits in a Baja California resort charges Donald Trump and his executive children with fraud and negligence.

The seven plaintiffs say they were "duped" into buying hotel-condo units in the Trump Ocean Resort Baja, a 526-unit, twin-tower project planned for 17 coastal acres a short drive south of the Mexican border. When the project collapsed in 2009, dozens of buyers lost their deposits, totaling more than $32 million.

Trump only licensed his name to the project's developer, Los Angeles-based Irongate. In the wake of the project's demise, Irongate said there was no money to return--the deposit money was used to fund early development in the project, which was allowed by its contracts, the company said.

Several buyers have already sued the developer and Trump, alleging various misdeeds. But this suit focuses on the Trumps.

The filing charges Trump and his children, Donald, Jr. and Ivanka, with misleading buyers into thinking they were more involved in the project. It cites a long line of typically bold Trump statements promoting the development, suggesting they were deeply involved in every aspect.

The plaintiffs say they didn't learn that the project was simply licensing the Trump name until the development collapsed.  

"The Trump defendants falsely led plaintiffs to believe that they were financial backers of the project," the suit claims.

Buyers typically put down 30 percent deposits on units, which were priced between $300,000 and $3 million. In December 2006 the project announced 188 units worth $122 million were sold in the first day, which was deemed a record for Mexico. "Trump Ocean Resort Baja will redefine the standard of premier property ownership and service excellence for all of Northern Mexico," Trump said at the time.

But the suit alleges that most of the talk was hype. The project didn't even have the necessary permits and Trump was paid off on a commission basis, the suit charges.

If nothing else, the case demonstrates the pitfalls of licensing your name and brand to a third party. The Trumps will certainly argue that they were simply doing their job, promoting the project for the developers, earning their licensing fees.

Trump has already countered with a lawsuit against the developers, alleging they didn't follow through on their contractual obligation

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