Development

Offering Plan Amendment Entitles Buyer's Assignee to Rescind

Kaplan v. Madison Park Group

NYLJ 4/26/12, p. 23, col. 6

AppDiv, First Dept.

(memorandum opinion)

In an action for return of a down payment brought by assignee of a contract to purchase two condominium units, both assignee and assignor appealed from Supreme Court's denial of their respective summary judgment motions. The Appellate Division modified to grant summary judgment to assignee, holding that an amendment to the offering plan entitled assignee to rescind its contract and obtain return of its down payment.

In 2007, assignor Lipman contracted to purchase two condominium units from sponsor Madison Park. On Oct. 30, 2008, Lipman assigned his rights to assignee. The latter agreed to assume Lipman's obligations under the purchase agreement, and paid a deposit of $622,500 to an escrow agent. On June 19, 2009, sponsor notified assignee of a June 27 closing date, but assignee never appeared. The purchase agreement made failure to appear at the closing a default, but also required sponsor to provide purchaser with written notice of any default, and to give purchaser 30 days from the date of the notice to cure the default. The assignment agreement permitted assignor Lipman to retain the deposit in the event of seller's failure to close title because of assignee's uncured default. Sponsor never sent purchaser any written notice, but, on June 29, two days after the closing, purchaser advised the sponsor that it was terminating the agreement and requested return of the down payment. On March 12, 2010, the Attorney General accepted for filing an amendment to the offering plan that gave all purchasers a right to rescind and obtain return of their down payments because of a foreclosure action that had been brought against sponsor. On March 22, assignee notified assignor Lipman of its decision to rescind, and demanded that Lipman instruct the escrow agent return the down payment. When Lipman refused, assignee brought this action. Supreme Court denied summary judgment motions by both parties.

In modifying to grant assignee's summary judgment motion, the Appellate Division conceded that assignee's failure to appear at the closing constituted a material breach, but held that the cure period provided by the contract had never started to run because neither assignor nor sponsor had sent the required written notice to assignee. As a result, when the offering plan amendment was filed, the contract was still in force, and assignee was entitled to invoke the rescission right provided to all purchasers. Because assignee properly invoked that right, assignee was entitled to return of the down payment.

Offering Plan Amendment Entitles Buyer's Assignee to Rescind

Kaplan v. Madison Park Group

NYLJ 4/26/12, p. 23, col. 6

AppDiv, First Dept.

(memorandum opinion)

In an action for return of a down payment brought by assignee of a contract to purchase two condominium units, both assignee and assignor appealed from Supreme Court's denial of their respective summary judgment motions. The Appellate Division modified to grant summary judgment to assignee, holding that an amendment to the offering plan entitled assignee to rescind its contract and obtain return of its down payment.

In 2007, assignor Lipman contracted to purchase two condominium units from sponsor Madison Park. On Oct. 30, 2008, Lipman assigned his rights to assignee. The latter agreed to assume Lipman's obligations under the purchase agreement, and paid a deposit of $622,500 to an escrow agent. On June 19, 2009, sponsor notified assignee of a June 27 closing date, but assignee never appeared. The purchase agreement made failure to appear at the closing a default, but also required sponsor to provide purchaser with written notice of any default, and to give purchaser 30 days from the date of the notice to cure the default. The assignment agreement permitted assignor Lipman to retain the deposit in the event of seller's failure to close title because of assignee's uncured default. Sponsor never sent purchaser any written notice, but, on June 29, two days after the closing, purchaser advised the sponsor that it was terminating the agreement and requested return of the down payment. On March 12, 2010, the Attorney General accepted for filing an amendment to the offering plan that gave all purchasers a right to rescind and obtain return of their down payments because of a foreclosure action that had been brought against sponsor. On March 22, assignee notified assignor Lipman of its decision to rescind, and demanded that Lipman instruct the escrow agent return the down payment. When Lipman refused, assignee brought this action. Supreme Court denied summary judgment motions by both parties.

In modifying to grant assignee's summary judgment motion, the Appellate Division conceded that assignee's failure to appear at the closing constituted a material breach, but held that the cure period provided by the contract had never started to run because neither assignor nor sponsor had sent the required written notice to assignee. As a result, when the offering plan amendment was filed, the contract was still in force, and assignee was entitled to invoke the rescission right provided to all purchasers. Because assignee properly invoked that right, assignee was entitled to return of the down payment.