Cooperatives & Condominiums

Supreme Ct., N.Y. Cty.

(Mills, J.)

In an article 78 proceeding, condominium sponsor challenged the state attorney general's determination ordering sponsor to return a deposit by a purchase of a newly constructed condominium unit. The court denied the petition and dismissed the proceeding, holding that the attorney general's construction of the sale contract was not arbitrary or capricious.

On Dec. 27, 2007, purchaser contracted to buy a condominium apartment for $2.9 million, and placed a $435,000 deposit into escrow. The sale contract listed a closing date of Nov. 1, 2008 and included a force majeure clause permitting the sponsor to extend the closing date for up to one year if the conditions of the clause were met. The contract also provides that the agreement would be deemed canceled if title were not conveyed within one year after the closing date and if purchaser gives seller 30 days notice after expiration of that one year. By a letter dated Nov. 1, 2008, purchaser demanded a closing on or about Dec. 3, 2008, and made time of the essence. Sponsor rejected the demand, contending that it had one year after the scheduled closing date to close on the apartment. Sponsor later scheduled a closing, and purchaser did not appear. Sponsor then submitted an application to the attorney general for a determination on disposition of the down payment. The attorney general held that purchaser was entitled to return of the down payment, concluding that the force majeure clause prevailed over the cancellation clause, and that sponsor had not identified any instance of force majeure. Sponsor then brought this article 78 proceeding.

In denying the petition, the court noted that the attorney general had promulgated regulations governing newly constructed condominiums, and that the regulations required sponsor or purchaser to apply to the attorney general to resolve disputes regarding deposits held in escrow. Here, the attorney general made a determination, and the court held that the attorney general's determination was entitled to great weight. The court held that the attorney general had rationally construed the two contractual provisions. Because the determination was not arbitrary or capricious, the court dismissed the article 78 proceeding.

Mechanic's Liens Against Condo Units Upheld

Matter of Application of Myrtle Owner LLC

NYLJ 8/3/11

Supreme Ct., Kings Cty.

(Demarest, J.)

Condominium sponsor moved to discharge and cancel three notices of mechanic's lien. The court denied the motion, holding that because the liens identified the individual units as well as the condominium as a whole, the liens remained binding with respect to parties who owned the individual units at the time of filing.

On March 11, 2010, lienor filed three notices of mechanic's lien to cover work done for the condominium sponsor's contractor. The liens identified the property subject to the liens as “Premises known as 150 Myrtle Avenue, Brooklyn, New York, more particularly described” in two named exhibits. The exhibits listed the individual unit numbers associated with each of the commercial and residential units. The sponsor contended that because the property description was not limited to the particular units owned by the party liable to the lienor, the liens constituted invalid blanket liens subject to cancellation. Sponsor also argued that because the liens were invalid ab initio, the lienor was not entitled to amend the notice of lien to correct the description. The sponsor also contended that the lien could not apply to units sold before filing of the notices of lien, even if the deeds to those units were not recorded until after filing of the notices of lien.

In denying the sponsor's motion to cancel the notices, the court held that because each unit was separately identified by block and lot number, and because the liens did not purport to include common areas, the liens did not constitute invalid blanket liens. At the same time, however, the court held that the liens were not valid with respect to purchasers who had received deeds before filing of the notices of lien, even if those deeds were not recorded until later. The court relied on RPL section 339-l(2), which provides that a lien for labor or materials furnished to a unit shall not be the basis for the filing of a lien unless the owner consents to or requests the labor or materials. Here, it is conceded that the purchasers never consented to or requested the labor or materials. Moreover, because RPL section 244 provides that a grant takes effect upon delivery, the purchasers were already the owners at the time the notice of lien were filed. As a result, they were not bound by the notices of lien. The court therefore granted lienor's motion to amend the notices of lien to include all of those units owned by the sponsor at the time the lien was filed.

Attorney General's Construction of Sale Contract Upheld

Application of Madison Park Owner LLC v. New York State Division of Human Rights

NYLJ 8/10/11

Supreme Ct., N.Y. Cty.

(Mills, J.)

In an article 78 proceeding, condominium sponsor challenged the state attorney general's determination ordering sponsor to return a deposit by a purchase of a newly constructed condominium unit. The court denied the petition and dismissed the proceeding, holding that the attorney general's construction of the sale contract was not arbitrary or capricious.

On Dec. 27, 2007, purchaser contracted to buy a condominium apartment for $2.9 million, and placed a $435,000 deposit into escrow. The sale contract listed a closing date of Nov. 1, 2008 and included a force majeure clause permitting the sponsor to extend the closing date for up to one year if the conditions of the clause were met. The contract also provides that the agreement would be deemed canceled if title were not conveyed within one year after the closing date and if purchaser gives seller 30 days notice after expiration of that one year. By a letter dated Nov. 1, 2008, purchaser demanded a closing on or about Dec. 3, 2008, and made time of the essence. Sponsor rejected the demand, contending that it had one year after the scheduled closing date to close on the apartment. Sponsor later scheduled a closing, and purchaser did not appear. Sponsor then submitted an application to the attorney general for a determination on disposition of the down payment. The attorney general held that purchaser was entitled to return of the down payment, concluding that the force majeure clause prevailed over the cancellation clause, and that sponsor had not identified any instance of force majeure. Sponsor then brought this article 78 proceeding.

In denying the petition, the court noted that the attorney general had promulgated regulations governing newly constructed condominiums, and that the regulations required sponsor or purchaser to apply to the attorney general to resolve disputes regarding deposits held in escrow. Here, the attorney general made a determination, and the court held that the attorney general's determination was entitled to great weight. The court held that the attorney general had rationally construed the two contractual provisions. Because the determination was not arbitrary or capricious, the court dismissed the article 78 proceeding.

Mechanic's Liens Against Condo Units Upheld

Matter of Application of Myrtle Owner LLC

NYLJ 8/3/11

Supreme Ct., Kings Cty.

(Demarest, J.)

Condominium sponsor moved to discharge and cancel three notices of mechanic's lien. The court denied the motion, holding that because the liens identified the individual units as well as the condominium as a whole, the liens remained binding with respect to parties who owned the individual units at the time of filing.

On March 11, 2010, lienor filed three notices of mechanic's lien to cover work done for the condominium sponsor's contractor. The liens identified the property subject to the liens as “Premises known as 150 Myrtle Avenue, Brooklyn, New York, more particularly described” in two named exhibits. The exhibits listed the individual unit numbers associated with each of the commercial and residential units. The sponsor contended that because the property description was not limited to the particular units owned by the party liable to the lienor, the liens constituted invalid blanket liens subject to cancellation. Sponsor also argued that because the liens were invalid ab initio, the lienor was not entitled to amend the notice of lien to correct the description. The sponsor also contended that the lien could not apply to units sold before filing of the notices of lien, even if the deeds to those units were not recorded until after filing of the notices of lien.

In denying the sponsor's motion to cancel the notices, the court held that because each unit was separately identified by block and lot number, and because the liens did not purport to include common areas, the liens did not constitute invalid blanket liens. At the same time, however, the court held that the liens were not valid with respect to purchasers who had received deeds before filing of the notices of lien, even if those deeds were not recorded until later. The court relied on RPL section 339-l(2), which provides that a lien for labor or materials furnished to a unit shall not be the basis for the filing of a lien unless the owner consents to or requests the labor or materials. Here, it is conceded that the purchasers never consented to or requested the labor or materials. Moreover, because RPL section 244 provides that a grant takes effect upon delivery, the purchasers were already the owners at the time the notice of lien were filed. As a result, they were not bound by the notices of lien. The court therefore granted lienor's motion to amend the notices of lien to include all of those units owned by the sponsor at the time the lien was filed.