Cooperatives & Condominiums

Co-Op Board's Conditions on Approval Entitle Purchaser to Deposit

Sit v. Schnaps

NYLJ 2/23/05, p. 2., col. 3

Supreme Ct., Queens Cty

(Taylor, J.)

In an action by co-op purchasers to recover a down payment, both the purchasers and the seller sought summary judgment. The court granted the purchasers' summary judgment motion, holding that the conditional approval of the co-op board did not constitute approval within the meaning of the sale contract.

The purchasers contracted to purchase the shares associated with a Forest Hills apartment. The sale contract provided that the sale was “subject to the approval” of the co-op board. Although the closing was originally scheduled to take place on or about June 1, 2004, the closing date was adjourned for 30 days to permit the purchasers to obtain approval from the board. The purchasers submitted an application to the board, and were interviewed on June 24. On July 2, the co-op board sent an approval letter, but conditioned approval on payment into escrow of $13,556.16, representing 18 months' escrow. The purchasers sought to negotiate the escrow amount, but on July 13, the seller's lawyer sent the purchasers a notice making time of the essence on Aug. 2. On July 15, the purchasers sent the seller a letter cancelling the contract due to the co-op board's failure to approve the purchasers unconditionally. The purchasers sought return of the $28,200 down payment. Subsequently, the co-op coporation notified the purchasers that the corporation was not approving the sale due to the purchasers' failure to comply with the escrow condition. The purchasers then brought this action for return of the down payment.

In awarding summary judgment to the purchasers, the court concluded that they had acted in good faith and were unable to comply with the co-op board's escrow requirement. The court rejected, for lack of supporting evidence, the seller's argument that such escrow conditions were routine and that the purchasers were aware of the possibility that the conditions would be imposed. Moreover, the court concluded that the co-op board's imposition of an onerous condition eviscerated the co-op corporation's consent to the transfer, thus entitling purchasers to cancel the contract and recover their down payment.

Co-Op Board's Conditions on Approval Entitle Purchaser to Deposit

Sit v. Schnaps

NYLJ 2/23/05, p. 2., col. 3

Supreme Ct., Queens Cty

(Taylor, J.)

In an action by co-op purchasers to recover a down payment, both the purchasers and the seller sought summary judgment. The court granted the purchasers' summary judgment motion, holding that the conditional approval of the co-op board did not constitute approval within the meaning of the sale contract.

The purchasers contracted to purchase the shares associated with a Forest Hills apartment. The sale contract provided that the sale was “subject to the approval” of the co-op board. Although the closing was originally scheduled to take place on or about June 1, 2004, the closing date was adjourned for 30 days to permit the purchasers to obtain approval from the board. The purchasers submitted an application to the board, and were interviewed on June 24. On July 2, the co-op board sent an approval letter, but conditioned approval on payment into escrow of $13,556.16, representing 18 months' escrow. The purchasers sought to negotiate the escrow amount, but on July 13, the seller's lawyer sent the purchasers a notice making time of the essence on Aug. 2. On July 15, the purchasers sent the seller a letter cancelling the contract due to the co-op board's failure to approve the purchasers unconditionally. The purchasers sought return of the $28,200 down payment. Subsequently, the co-op coporation notified the purchasers that the corporation was not approving the sale due to the purchasers' failure to comply with the escrow condition. The purchasers then brought this action for return of the down payment.

In awarding summary judgment to the purchasers, the court concluded that they had acted in good faith and were unable to comply with the co-op board's escrow requirement. The court rejected, for lack of supporting evidence, the seller's argument that such escrow conditions were routine and that the purchasers were aware of the possibility that the conditions would be imposed. Moreover, the court concluded that the co-op board's imposition of an onerous condition eviscerated the co-op corporation's consent to the transfer, thus entitling purchasers to cancel the contract and recover their down payment.