Contract Language Matters: How a NY Court Protected a Seller's Deposit Rights

This week we wanted to draw your attention to an interesting case decided in the Commercial Term Part of the Kings County Supreme Court wherein the Court granted Plaintiff-seller’s motion for summary judgment awarding Seller the Contract Deposit and legal fees due to Defendant-buyer’s default under the Contract and dismissed the Defendant-buyer’s motion for summary judgment seeking an Order declaring Plaintiff-seller in Default and directing the return of the Defendant-purchaser’s down payment plus legal fees.  The decision turned on the fact that the post-contract discovery of a zoning requirement that requires the widening of the sidewalk and thereby reduced the square footage of the Property being purchased was not a Seller’s closing obligation covered by the Contract. 
The relevant facts of, as well as a link to, the case are set forth below.  

The Plaintiff-seller and the Defendant-buyer executed a contract for the sale of vacant land in 2022.  Prior to closing, the buyer sent a letter to the seller averring that “the zoning will require the Buyer to widen the sidewalk to 15 feet, which will then shorten the property by 3 feet. Hence, Buyer will not be purchasing what the contract represented the property to be. Accordingly, the Seller is in breach of contract, and the Buyer is demanding the return of the contract deposit…”  The Plaintiff-seller rejected the purchaser’s demand and thereafter, sought a Court order finding that the Defendant had breached the contract and a declaratory judgment directing the contract deposit to be forfeited to the Plaintiff, as well awarding Plaintiff its legal fees. In granting the Plaintiff’s motion for Summary Judgment (and denying the Defendant-purchaser’s motion for Summary Judgment), the Court summarized as follows:

In the contract, no representations or warranties were made as to the width of the sidewalk or as to “compliance…with any laws, rules, ordinance or regulations of any government authority”, and the property was being sold subject to all existing zoning regulations. Therefore, the Court found “that defendant’s counterclaims are utterly refuted by the sales agreement as they are solely premised on the zoning violation, which is not covered by the sales agreement.” Plaintiff was also awarded its attorneys’ fees and costs for the litigation, as provided for in the contract. EQR-Gowanus Development LLC v. Yael Garden LLC, 2023 NY Slip Op 31594, decided May 11, 2023, is posted at https://www.nycourts.gov/reporter/pdfs/2023/2023_31594.pdf

This case is another important example of the need to carefully draft Contracts of Sale to clearly identify the parties’ obligations when it comes to possible zoning issues that may affect the property being purchased.