Real Property Law

In buyer’s action to recover a down payment, buyer appealed from Supreme Court’s grant of summary judgment to seller. The Appellate Division reversed, holding that questions of fact remained about buyer’s compliance with the mortgage contingency clause in the sale contract.

The sale contract provided that buyer would make a good faith application for a mortgage loan, and the sale contract would be canceled if the buyer were unable to procure a mortgage loan within 45 days. Buyer paid a down payment upon execution of the contract, and then applied for what is colloquially known as a reverse mortgage, and the lender denied the application because “Residual Income Insufficient for Amount of Credit Requested.” Buyer then requested return of the down payment, contending that the denial was a result of the property’s location in a flood zone and on carrying costs that were higher than anticipated. Seller refused to return the down payment, contending that buyer had breached by applying for a reverse mortgage rather than a traditional mortgage and by misrepresenting that she had enough income to qualify for a mortgage. When buyer sued, Supreme Court awarded summary judgment to seller.
In reversing, the Appellate Division held that issues of fact remained about whether the reverse mortgage product for which buyer applied failed to satisfy the criteria set forth in the contract, and about whether buyer’s prior bankruptcy or a pending lawsuit caused her failure to obtain the required mortgage approval. As a result, Supreme Court erred in awarding summary judgment to seller.