Real Property Law

Purchaser Waived Title Objections

Beagle Developers LLC v. Long Island Beagle Club #11

NYLJ 6/29/09, p. 31, col. 4

AppDiv, First Dept.

(memorandum opinion)

In an action by real estate purchaser for return of a down payment, purchaser appealed from Supreme Court's denial of its summary judgment motion and grant of summary judgment to defendant. The Appellate Division affirmed, holding that by declaring time to be of the essence, purchaser waived any title objections and agreed to accept such title as seller could convey.

The sale contract gave purchaser 60 days (later extended to 75) to perform due diligence on the property and to cancel the contract if its studies revealed that the property was unsuitable for its intended use. The contract provided that if purchaser did not cancel within the period, and deposited another $250,000 in addition to the $750,000 down payment, purchaser's right to cancel would be waived, and the entire down payment would be nonrefundable. Purchaser did not cancel, but subsequently raised title objections based on a prior merger between seller and another entity. Seller did not cure those objections, but instead declared time to be of the essence. Purchaser then also declared a time of the essence closing for the same date. Purchaser then refused to close based on the title objection, and brought this action for return of its down payment. Supreme Court awarded summary judgment to seller, and purchaser appealed.

In affirming, the Appellate Division assumed, as purchaser had argued, that its failure to cancel within the initial period did not result in waiver of seller's obligation to provide marketable title. But the court noted that the sale contract did not obligate seller to expend any amount to dispose of title objections. Instead, if seller failed to cure, purchaser could terminate the contract or accept such title as seller could deliver. In this case, when purchaser declared a time-of-the-essence closing, purchaser elected to accept such title as seller could deliver. Purchaser's failure to accept that title constituted a default and entitled seller to retain the down payment. The court also rejected purchaser's argument that seller's attempts to accommodate purchaser's requests for documents related to the merger modified the terms of the original contract. Finally, the court held that the escrow agent's release of the down payment to seller was not a material breach because purchaser's equitable lien on the property was worth more than the down payment. Moreover, the court noted that purchaser had suffered no damages in light of the court's holding that seller was entitled to return of the down payment.

Seller Not Required to Remove Hazardous Wastes, But Purchaser Entitled to Return of Deposit

Waldman v LDK Realty, Inc.

NYLJ 6/16/09, p. 45, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In purchaser's action seeking damages and specific performance for breach of a contract of sale, both parties appealed from a Supreme Court order directing seller to remove hazardous substances or return purchaser's down payment. The Appellate Division modified to eliminate any requirement that seller remove hazardous wastes, but held that purchaser had not breached and was entitled to return of the down payment.

The sale contract recited that to the best of seller's knowledge, there were no hazardous substances on the parcel, and provided purchaser with a revocation period during which purchaser would have the right to conduct an environmental inspection. Purchaser did not discover any hazardous substances during the revocation period, and did not elect to terminate the contract. Several months later, after the contract's closing date had passed, purchaser informed seller that he had discovered hazardous substances. Seller informed purchaser that the time period for reporting such a problem had expired. Thereafter, seller made time of the essence and set a closing date. Purchaser then brought this action for specific performance of the contract and for damages. Supreme Court awarded purchaser summary judgment to the extent of requiring seller to remove the wastes or return purchaser's down payment. Both parties appealed.

In modifying, the Appellate Division emphasized that the contract itself did not afford purchaser the remedy of specific performance if hazardous wastes were found on the premises. The court therefore held that plaintiff's complaint should have been dismissed. The court concluded, however, that Supreme Court should have awarded purchaser summary judgment on seller's counterclaim to retain the deposit, noting that purchaser had not breached the contract, and was therefore entitled to return of the down payment.

Purchaser Waived Title Objections

Beagle Developers LLC v. Long Island Beagle Club #11

NYLJ 6/29/09, p. 31, col. 4

AppDiv, First Dept.

(memorandum opinion)

In an action by real estate purchaser for return of a down payment, purchaser appealed from Supreme Court's denial of its summary judgment motion and grant of summary judgment to defendant. The Appellate Division affirmed, holding that by declaring time to be of the essence, purchaser waived any title objections and agreed to accept such title as seller could convey.

The sale contract gave purchaser 60 days (later extended to 75) to perform due diligence on the property and to cancel the contract if its studies revealed that the property was unsuitable for its intended use. The contract provided that if purchaser did not cancel within the period, and deposited another $250,000 in addition to the $750,000 down payment, purchaser's right to cancel would be waived, and the entire down payment would be nonrefundable. Purchaser did not cancel, but subsequently raised title objections based on a prior merger between seller and another entity. Seller did not cure those objections, but instead declared time to be of the essence. Purchaser then also declared a time of the essence closing for the same date. Purchaser then refused to close based on the title objection, and brought this action for return of its down payment. Supreme Court awarded summary judgment to seller, and purchaser appealed.

In affirming, the Appellate Division assumed, as purchaser had argued, that its failure to cancel within the initial period did not result in waiver of seller's obligation to provide marketable title. But the court noted that the sale contract did not obligate seller to expend any amount to dispose of title objections. Instead, if seller failed to cure, purchaser could terminate the contract or accept such title as seller could deliver. In this case, when purchaser declared a time-of-the-essence closing, purchaser elected to accept such title as seller could deliver. Purchaser's failure to accept that title constituted a default and entitled seller to retain the down payment. The court also rejected purchaser's argument that seller's attempts to accommodate purchaser's requests for documents related to the merger modified the terms of the original contract. Finally, the court held that the escrow agent's release of the down payment to seller was not a material breach because purchaser's equitable lien on the property was worth more than the down payment. Moreover, the court noted that purchaser had suffered no damages in light of the court's holding that seller was entitled to return of the down payment.

Seller Not Required to Remove Hazardous Wastes, But Purchaser Entitled to Return of Deposit

Waldman v LDK Realty, Inc.

NYLJ 6/16/09, p. 45, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In purchaser's action seeking damages and specific performance for breach of a contract of sale, both parties appealed from a Supreme Court order directing seller to remove hazardous substances or return purchaser's down payment. The Appellate Division modified to eliminate any requirement that seller remove hazardous wastes, but held that purchaser had not breached and was entitled to return of the down payment.

The sale contract recited that to the best of seller's knowledge, there were no hazardous substances on the parcel, and provided purchaser with a revocation period during which purchaser would have the right to conduct an environmental inspection. Purchaser did not discover any hazardous substances during the revocation period, and did not elect to terminate the contract. Several months later, after the contract's closing date had passed, purchaser informed seller that he had discovered hazardous substances. Seller informed purchaser that the time period for reporting such a problem had expired. Thereafter, seller made time of the essence and set a closing date. Purchaser then brought this action for specific performance of the contract and for damages. Supreme Court awarded purchaser summary judgment to the extent of requiring seller to remove the wastes or return purchaser's down payment. Both parties appealed.

In modifying, the Appellate Division emphasized that the contract itself did not afford purchaser the remedy of specific performance if hazardous wastes were found on the premises. The court therefore held that plaintiff's complaint should have been dismissed. The court concluded, however, that Supreme Court should have awarded purchaser summary judgment on seller's counterclaim to retain the deposit, noting that purchaser had not breached the contract, and was therefore entitled to return of the down payment.