When Can Seller Keep Buyer Deposit New York

Paradigm: Graur Razvan/FreeDigitalPhotos.net

Sometimes the obvious even so bears emphasis, even in the real estate litigation context.

If your ability to purchase a property hinges upon which your power to get needed financing (which is often the case), you lot'd amend brand sure that this is memorialized in the contract; Otherwise, you could end up like the defendant in Abart Holdings LLC five. Bayou Properties, Inc., and lose your entire deposit when a courtroom finds yous in breach of your real estate contract .

How the Defendant-Heir-apparent Lost its Deposit that Was in Escrow

In this New York County case, the plaintiff-seller moved for summary judgment, pretty much correct out of the gate, on that branch of its claim seeking a finding that it was entitled to keep the deposit the defendant buyers had placed into escrow as damages for the defendants' failure to abide by their contract, and close on the property.

In granting the plaintiff seller'south movement, the Court noted that the but reasons proffered past the buyers for failing to shut equally had been agreed were two-fold, and neither were convincing:

(1) that the plaintiff had failed to deliver sure documents at the closing; and,

(ii) that the defendants had not received the funding that was needed to shut, and that had ever been understood equally a pre-condition, or in legal terms, a "condition precedent," to the deal.

And here'due south why the defendants' arguments failed:

First, the defendants did not raise the plaintiff's purported failure to deliver these documents equally an issue at the closing, and therefore, this issue was waived;

Second -and this is important - since the parties never expressly fabricated the defendants' power to secure financing a status precedent to closing, the Court would not exercise so now .

In back up of its holding, the Court summarized the law governing conditions precedent as follows:

"A condition precedent is 'an act or consequence, other than the lapse of time, which, unless the condition is excused, must occur, before a duty to perform a promise in the understanding arises.'" (Oppenheimer & Co., Inc v. Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690 [1995]). "[Due north]onoccurrence of the condition may yet be excused by waiver, alienation or forfeiture." (Id at 691).

"Courts will interpret doubtful language equally embodying a promise or constructive condition rather than an express condition.". "If the language is in any way ambiguous, the police does non favor a construction which creates a condition precedent. A contractual duty will non be construed as a status precedent absent articulate language showing that the parties intended to make it a condition precedent." (Ashkenazi 5. Kent S. Assoc., LLC, 51 AD3d 611, 611-612 [2d Dept 2008]).

The Takeaway

The lesson to be gleaned from this case is clear: if there are atmospheric condition that you need fulfilled before you lot tin close on a property, brand certain they are memorialized in the contract and/or at the closing.

Or else.