WEST PALM BEACH, FL-Buyers fighting with Related Group over deposits on units at the developer's CityPlace South Tower failed to stop the foreclosure sale Monday. Lawyers representing the contract holders say their claims could be effectively wiped out.

The lawyers contend there would be little chance of collecting from the developer even if they are successful in their lawsuits to recover deposits on units at the failed project that Miami-based Related Group is turning over to lenders in a "friendly foreclosure." The Bank of Nova Scotia was the only bidder in the $120-million foreclosure, taking 370 unsold units at the 420-unit CityPlace building with a minimum $100 bid.

Attorneys Joseph Altschul, Jonathan Kline and Robert Cooper, who are each representing several buyers of units in the 20-story building, had tried to stop the foreclosure since last week. They asked Palm Beach Circuit Court Judge Meenu Sasser to set aside the CityPlace foreclosure judgment until they resolve their disputes with the developer.

Sasser denied the request Thursday, but the attorneys said they planned to appeal to the 4th District Court of Appeal and asked for an emergency stay to stop the foreclosure sale. On Monday, she denied the buyers' lawyers' request to delay the finalization of the foreclosure until the disputes over the deposits was over. She also denied their motion to stay the sale pending an appeal.

Since South Florida's condo market started to collapse in 2007, a wave of buyers has been trying to cancel pre-construction purchase contracts and recover their deposits. Hundreds of buyers have sued various condo developments, but many of the projects have gone into foreclosure. With lenders taking over the projects, it can be more difficult for buyers to recover their deposits.

Altschul, who represents two CityPlace buyers trying to recover a total of about $134,000 in deposits, says Related and the lender are in a rush to finalize the foreclosure because they want to wipe out liens by buyers who are still fighting for their deposits. Waiting to conclude the foreclosure until CityPlace resolves its disputes over deposits would not interfere in the sales or operations of the property, he says, adding that at least 10 unit sales closed at CityPlace since the foreclosure suit was filed.

Nova Scotia Bank attorney Gregory Grossman, with Astigarraga Davis Mullins & Grossman in Miami, told the judge that claiming the lender filed the foreclosure action to harm buyers is "ludicrous." He told the judge Thursday, "When [Altschul asks] 'why the rush,' I say what's the harm? What's the difference?"

Joseph Ianno, Jr., a Carlton Fields attorney in West Palm Beach representing the developer, says the 16 buyers represented by Altschul, Kline and Cooper are trying to delay an "inevitable" foreclosure. Together, the buyers have about $1.5 million in deposits at stake.

When the foreclosure suit was filed, Related and Nova Scotia representatives said it was a friendly foreclosure, but they announced they would proceed with the legal process rather than execute a deed in lieu of foreclosure. Many friendly foreclosures are done through deeds, which is quicker, but some lenders choose to go to court for several reasons, including avoiding costly documentary stamp taxes on the deed and extinguishing the interests of any other lienholders including contractors and mezzanine lenders.

In this case, Altschul says the only potential liens are from the buyers since CityPlace does not have a second mortgage or any unpaid contractors. "The lender could have easily done a deed in lieu of foreclosure," he wrote in his memo to the court. "The only reason for going through the foreclosure is to wipe out" the buyers' liens.

Altschul says buyers who receive a judgment to recover their deposits need to have the judgment secured by a senior lien against the property, but that would not be possible after a foreclosure is final.

"The developer used our clients' money to build the project," he says. "If the court determined [the buyers] are entitled to the return of the deposit, then they are entitled to a lien to secure the portion of our money that was used to build the project. If we have a lien against the project, that gives us the ability to get paid out of a future sale or foreclose the lien."

CityPlace South Tower, the Related-owned limited liability company that built the project, is a single-asset entity. "If this property gets foreclosed, [the LLC] doesn't own anything else," Altschul says. "Once that asset is gone, there is nothing else there."

Only half of the deposit money from buyers is in escrow. Sasser says she denied the motion to vacate the foreclosure judgment because the buyers claim they are "senior lienholders," so they can protect their rights by filing a lis pendens.

Cooper disagreed. "If someone shows up and puts up a bid of $80 million on Monday, our claims could be wiped out before we have an opportunity to prove our rights," he told the judge.

After the hearing, Ianno told Cooper his settlement offer—5% percent of the purchase price, or 25% of the deposit—was still available. Cooper told him that wasn't enough, and his clients wanted at least half of their deposits.

Grossman says the chances of someone else showing up at the clerk's office to buy the tower are very slim. "The practical reality is there is not going to be a buyer on Monday," he says. "You don't enter into a friendly foreclosure if you don't" intend to take over the property.