Rescission of Condo Purchase Contract and Settlement at Reduced Purchase Price
In the offering plan of a newly constructed condominium, the sponsor represented that it was “anticipated that the first Residential Unit will close on or about November 1, 2008,” and “[i]f such closing day is delayed twelve (12) months or more, purchasers will be offered a right of rescission.” The offering plan also represented that the first full year of condominium operation “will be from November 1, 2008 through October 31, 2009.”
Accordingly, the first residential unit closing with a bona fide purchaser was required to take place no later than October 31, 2009.
Prior to hiring Adam Leitman Bailey, P.C., the firm’s client had contracted to purchase a unit in the building and had paid the sponsor a $722,560 deposit.
Despite the representations in the offering plan, final completion of the building during 2009 was continually delayed, and the firm’s client became increasingly concerned about the construction delays and problems that the developer appeared to be experiencing.
Nevertheless, the first residential unit closing reportedly took place on October 29, 2009 at a price that was 24% less than the price listed in the offering plan for that unit. Adam Leitman Bailey, P.C.’s client subsequently learned facts which strongly suggested that the first residential unit closing was a sham “insider” deal effected solely to meet the October 31st deadline – for the sponsor to avoid becoming obligated to offer the right of rescission to the firm’s client and to all other non-sponsor/non-insider purchasers of units at the condominium.
Accordingly, Adam Leitman Bailey, P.C. demanded that the sponsor refund the entire amount of the firm’s client’s down payment, plus all accrued interest, and rescind the contract.
The sponsor denied the “sham” nature of the first residential closing, but, after extended negotiations, was willing to settle the dispute by offering to reduce the firm’s client’s original contract price and to pay the New York State and City transfer taxes and the mansion tax due at the closing — a deal that amounted to a 13% discount off of the firm’s client’s original $3,600,000 contract price.
This matter was handled by the firm’s founding partner Adam Leitman Bailey and by John M. Desiderio, the chair of the firm’s Real Estate Litigation Practice Group.