Rescission of Condo Purchase Contract and Refund of Client’s Deposit
A client of Adam Leitman Bailey, P.C. contracted with the sponsor of a newly constructed condominium to purchase a unit in the building. Under the terms of the agreement, the sponsor was required to set a date for Closing of Title that “shall be not less than thirty (30) days after the date on which notice of the Closing Date is sent.”
In addition, the purchase agreement expressly provided (a) that “the Purchaser’s obligation to close pursuant to this Purchase Agreement is conditioned on the Closing Date occurring no earlier than December 15, 2008 and no later than January 15, 2009,” and (b) that “[i]f the Closing does not occur by January 15, 2009 solely because Sponsor fails or is unable to fulfill its obligations under the Offering Plan or this Purchase Agreement, this contract shall be deemed cancelled and Purchaser’s deposit and Additional Payment will be returned in full.”
The offering plan required the sponsor to record the condo declaration before any closing could take place. Beginning in December 2008, the sponsor and sponsor’s counsel made numerous oral representations, that the condo declaration would be recorded shortly. Despite those representations, the declaration was not recorded until January 14, 2009.
On one-day’s notice, the sponsor then scheduled the closing for January 15, 2009. In response, Adam Leitman Bailey, P.C. notified sponsor’s counsel that the purchase agreement was deemed cancelled, due to the sponsor’s failure to fulfill its obligation to schedule the closing of title not less than thirty days after the date on which notice of the closing of title is sent, and demand was made for the refund of our client’s $295,000 deposit, plus interest.
The sponsor contended that the firm’s client was in default because its counsel had advised Adam Leitman Bailey, P.C. “on several occasions” that the sponsor expected to have the declaration recorded in time to close on January 15th, and that the sponsor was indeed ready, willing, and able to close on January 15th. The sponsor then rescheduled the closing date to February 20, 2009 and designated the new date time of the essence. When the firm’s client did not close on the rescheduled date, the sponsor then requested the New York Attorney General to decide the disposition of our client’s $295,000 down payment. The sponsor contended that it was entitled to retain the down payment based upon our client’s alleged “willful failure to close title in accordance with the Purchase Agreement.”
Adam Leitman Bailey, P.C. responded to the sponsor’s contention by noting: (a) that there was nothing in the parties’ agreement that obliged its client to commit to a closing date in the absence of the declaration’s recording; (b) that the purchase agreement clearly and unambiguously required thirty-days written notice of a closing date; (c) that, if the sponsor truly believed, in December 2008, that the declaration would be recorded “shortly,” there was nothing to prevent the sponsor from sending a 30-day notice of closing in anticipation of the recording occurring prior to the end of the requisite 30-day notice period, and (d) that the rescheduled closing date of February 20th was more than one month past the closing deadline of January 15th.
Before the attorney general could make a determination on the sponsor’s application, the sponsor decided to settle the dispute and agreed to pay our client $270,960.62 – a sum that was just $25,000 less than the firm’s client’s full deposit plus accrued interest.
This matter was handled by John M. Desiderio, Adam Leitman Bailey, P.C.’s Chair of the firm’s Real Estate Litigation Practice Group.