A recent ruling (to read the original text of the ruling, click here) from New York State Supreme Court’s Appellate Division, First Department was handed down last week, affirming a Supreme Court ruling on what happens when an in-contract co-op buyer dies before closing. The case involved an Upper East Side Park Avenue Cooperative Building where the judges opined that the sellers got to keep the deposit or the buyers went into default. The case had meandered its way through the legal system since 2005 after the buyer entered into contract for the $2.3 million purchase in 2005, put down a $230,000 deposit, and inconveniently passed away before the sale could be completed. His heirs wanted the money back, but it turns out there was a clause in the contract making the sale binding on his heirs Their claim that the clause was negated by another clause – the “Proposed Occupants” section, which was left blank – was not persuasive to the judges. As for the apartment in question, the owners even found another buyer to step in and make the purchase for $2.125 million in 2006.
The moral of this story, purchasers and their counsel would be wise to routinely add a clause in their own riders so there is no ambiguity in the unfortunate event that a purchaser happens to pass away prior to closing. It should be noted that under the 2001 form of Coop Contract there is now language to this effect in the printed form; Purchasers should be mindful to employ this language in limited instances where the older 1989 form is provided by Sellers. Importantly, the Condominium and Residential forms of contract , however, still contain no such protection for the unwary Purchaser’s attorney.
Something like the following could suffice:
“In the event of the death of Purchaser, then the executor or administrator of Purchaser’s estate, shall have the sole right to terminate this Contract provided written notice of termination is sent within thirty (30) days after the occurrence of such death. All respective obligations of the parties under the Contract shall thereupon cease and be of no further force and effect and Purchaser’s estate(s) shall immediately obtain a full refund of the Contract Deposit.”
For more information and guidance on all of your purchase and sale needs, or those of your clients, please contact Neil B. Garfinkel at 212-201-1173 and Michael C. Xylas at 646-473-7567.