The letter from Donald Trump's lawyer didn't say, "You're fired." But it said something close.

Back in 2003, when Trump was planning his downtown residential tower, he gave about 40 insiders an attractive deal: They could sign contracts to buy condominiums in the Trump International Hotel & Tower at a discount. In some cases they agreed to pay about $500 a square foot.

But units in the building, still under construction, are on the market for as much as $1,343 a square foot. That would represent a tidy profit for these early purchasers. Except that Trump has notified them that their agreements are "null and void."

That's not as catchy as Trump's stock phrase on "The Apprentice," but it has been enough to upset some would-be purchasers who participated in what was called a "friends and family" sales program.

Since the summer, Trump has notified this special class of buyers, many with a professional connection to the project, that their deals have been canceled. If they want to close on units in the tower, now due for completion in 2009, they must pay closer to current asking prices.

Some real estate experts strained to cite a precedent for a developer offering contracts at a preconstruction discount to get the ball rolling on a project and then canceling the deals later as selling prices rose.

"I never heard of this before," said Richard Peiser, a professor of real estate development at the Harvard Graduate School of Design.

If a developer asks firms they work with to buy units "to help a project appear successful and achieve certain hurdles," Peiser said, "it would seem the buyer should enjoy the upside."

"In my experience it would be very unusual for a developer to get out of a purchase-and-sale contract because prices have gone up," said Kevin Ahearn, president of Boston-based Otis & Ahearn Real Estate, which sells luxury residences.

One of Trump's unhappy "friends" is Judi Diamond-Falk, an Evanston architect who designed an early sales office for him here.

"Anyone who buys preconstruction gets a financial benefit for the risk they take," Diamond-Falk said.

Trump also benefited from the early sales, she added, because he "could say that a certain percentage of units are presold to get his financing and tell the public a certain percentage was presold. People didn't know they were friends and family sales."

In April 2003, the Diamond-Falks paid about 10 percent less than the asking price, put down an initial deposit of 5 percent rather than the then-required 15 percent and would have been permitted to sell their unit before they closed on it, Diamond-Falk said.

But Trump said in an interview Monday that the sales contract included wording that allows him to raise the prices for the friends and family units. Neither he nor the Diamond-Falks would provide the Tribune with a complete copy of the contract.

In June, Trump attorney Jason Greenblatt wrote to the Diamond-Falks to notify them that the sale was "null and void," citing "Paragraph 12 (b)" of the contract. That clause refers very generally to "matters beyond [the] seller's reasonable control" as a reason for the developer to default on the contract.

This clause "is only part of our rights and remedies," said Greenblatt. The friends and family sales "were a gift" to a small group, he said.

"From Day One, they understood that if the project was successful, the windfall would go to Mr. Trump," he said.

About 42 units were sold to friends and family. Contracts were renegotiated or terminated on at least 27 units, Greenblatt said. Two or three buyers balked at the new deal, he said, and a dozen still must be contacted.

Since 2003, of the 472 residential condos available, 373 have been sold. Of the 286 condo-hotel units, 220 have been sold, said Tere Proctor, Trump's sales director here.

As of November, residential asking prices ranged from $998 to $1,343 a square foot, compared with $400 to $750 in September 2003, according to Appraisal Research Counselors.

Most of the sales occurred by January 2005, said Jim Kutill, a vice president at Appraisal Research.

In the past two years the slowdown in the residential market has affected the approximately $775 million tower, Trump acknowledged. About 21 percent of the residential units remain unsold, Proctor said. At the same time, construction costs have skyrocketed.

Trump said one reason for canceling the friends and families contracts is to "have more income to handle potentially higher construction costs."

"This job has become a tremendous success because of me," Trump added. "Everyone knows, with a friends and family program, if a job is very successful, people have clauses whereby you renegotiate or terminate."

Of these early buyers also employed to work on the tower, he noted, "Don't feel bad for them. I paid them many millions of dollars in fees."

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Trump giveth and taketh away

The "Friends/Family Sales Program" allowed key people who participated in the Trump tower project to purchase one traditional condo or hotel condo unit at 10 percent below the initial sales prices. An initial deposit of 5 percent was required, in contrast with a 15 percent deposit others had to put down.

"As we anticipate raising prices periodically throughout the pre- and post-construction period, this opportunity would become increasingly more worthwhile with each price increase," says a Sept. 24, 2003, letter from the Trump Organization and Koenig & Strey GMAC Real Estate, the sales agent. Purchasers could "flip" their units, or assign their purchase agreement, to any third party at any time after construction began, according to the letter.

Jason Greenblatt, a New York lawyer representing the Trump Organization, has sent letters telling purchasers their purchase agreements are null and void "in accordance with our rights under the contract, including, without limitation, paragraph 12 (b)" (cited below):

Paragraph 12 (b): If seller defaults on any of seller's covenants or obligations hereunder, and such default is caused by matters beyond seller's reasonable control, then purchaser's sole and exclusive remedy ... shall be a refund of purchase's earnest money deposit and interest which may have accrued thereon to which purchaser is entitled pursuant to Paragraph 2 hereof and all payments theretofore made by purchaser. Upon refund to purchaser of said earnest money and payment of interest thereon, if any, and refund to purchaser of other amounts paid by purchaser, this purchase agreement shall be thereupon null and void with no further liabilities of either party hereto.