How many ways might a simple house sale contract go wrong?  Aromino v Van Tassel ;  2011 NY Slip Op 51058(U) ; Decided on June 6, 2011 ; Civil Court Of The City Of New York, Richmond County ; Straniere, J. points out a plethora.
 

Plaintiffs contract to buy a house, and give a down payment of $ 35,000.  They discover structural problems.  They hire an inspector.  Sellers did not agree, and send a "Time of the Essence letter."  Buyers resist and do not come to the closing.  Seller relents and sends a "cure letter."  The cure letter set November 8, 2006 as the closing date.  On November 6, sellers attorney wrote a letter saying that he was going to release the down payment on November 7, 2006 and mailed it by regular mail.  Of course the letter did not arrive until after November 8.

What was done wrong?  "This cure letter, issued six days after the alleged "time of the essence" closing was scheduled, gave the purchasers thirty-four days to appear for the closing. It also asserts a position which negates the intention of the "time of the essence" letter because it states: "If your client fail [sic] to cure said default, my clients [sic] intend to deem the contract canceled and retain as and for liquidated damages, all sums paid by Purchaser and will pursue other rights under the contract and law." Seller is withdrawing its previous declaration of the purchaser being in default and the contract breached, by stating that the client has not yet "deemed" that the contract has been canceled and seller only "intends" to cancel the contract. [*10]

Further negating the "time of the essence" is the fact that O’Sullivan sent the letter on October 5, 2006 to Strazzullo offering purchasers the opportunity to cure their default especially after having received a letter from Strazzullo dated September 18, 2006 rejecting the "time of the essence" closing and demanding a return of the deposit. Although this letter does not specifically state that the purchasers are canceling the contract, it makes an unequivocal demand for the return of the deposit. Based on this letter, seller could have claimed an anticipatory breach as of the date of receipt of the Strazzullo letter and sought to assert and enforce seller’s contract rights at that point and in any case, after the "time of the essence" closing date. There was no need to grant the purchasers an opportunity to cure in view of the fact there does not appear to be any evidence that the purchasers were interested in performing the contract.

The final action negating the "time of the essence" demand, is the fact that O’Sullivan in the October 5, 2006 letter gave the purchasers until November 8, 2006 to cure, yet on November 7, 2006 O’Sullivan released the escrow deposit to the seller. This was one day prior to the cure date. Even if giving the purchasers a date by which to cure their default was not required by the contract, once seller unilaterally afforded the purchasers the opportunity to do so O’Sullivan was required to wait until after November 8, 2006 to release the money; assuming he had a right to do so. "

Based on the court’s findings set forth above, O’Sullivan was not permitted to release the down payment to his client. Assuming however, that he either did properly make "time of the essence" and that he believed he was acting lawfully and in good faith, could O’Sullivan release the escrow? The answer is an unequivocal "NO."

First, paragraph 27 setting forth how the deposit would be treated states: "At Closing, the down payment shall be paid to Seller upon consummation of the closing…." The closing never took place. The contract, which was drafted by seller’s attorney, could have provided for release of the deposit upon a default by either party to the non-defaulting party, yet it did not. Because the seller drafted the contract, it must be construed against the seller.

Second, for some totally incomprehensible reason, seller’s attorney drafted paragraph 27 as if this were a contract subject to General Business Law Article 23-A, the statute commonly referred to as the Martin Act. As noted in the footnote in reference to that paragraph, there is no evidence that the property in question is subject to that law. In fact, paragraph 7 of the contract referring to the existence of a "home owners [sic] association" has been deleted from the agreement. Referance to the non-exisiting offering plan was not deleted from paragraphs 12 & 33. The only explanation would seem to be that seller’s attorney either cut and pasted this contract from another one in his computer or he adopted a contract drafted by some other practitioner without fully comprehending the significance of the paragraph.

The above being said, seller’s counsel voluntarily subjected himself to the requirements promulgated by the New York State Department of Law. These regulations are found in New York Code, Rules and Regulations (13 NYCRR §22.3). Prior to releasing any monies held in escrow, O’Sullivan had to comply with the procedure set forth in that regulation. The rules provide (13 NYCRR §22.3(k)(2)(vii)): "

The more important basis for purchasers seeking the refund of their deposit is the alleged structural defects discovered by Coull Building Inspections. This report is dated July 20, 2006, apparently after the parties executed the undated contract of sale. It should be noted that the contract did not give the purchasers a right to have a structural inspection nor did it make the agreement subject to a structural inspection. In fact, the common practice in Richmond County is for a potential purchaser to have a structural report prior to signing a contract in regard to the resale of a home. Although not prohibited, to seek one in the case of new construction is highly unusual. Had the purchasers been concerned about the structural integrity of the house, their counsel could have either negotiated having the structural inspection done before the contract was signed, or as a clause permitting cancellation of the contract after signing based on items in the structural report. Counsel for the purchasers did neither.

Before getting into an analysis of the Coull report, the court must note that as of December 31, 2005, six months before the undated contract was signed, the legislature passed legislation requiring that all home inspectors be licensed (Real Property Law Article 12-B, Home Inspection Professional Licensing). The report from William Coull fails to indicate that either he or the business was in fact properly licensed. No license number is disclosed any where in the document. In fact, disclosure of this information is required by the statute "on every home inspection report and in all advertising" (RPL §444-g). "