Schieber and Han Secure Return of $1 Million Down Payment for Real Estate Client

Evan Schieber and Lawrence Han recently delivered a significant victory for the Firm’s client which was seeking the return of its $1 million down payment in a real estate transaction that failed to close.

Prior to New York State’s shutdown of non-essential businesses in March 2020, the client had entered into a contract to purchase a commercial building in Brooklyn for approximately $20 million, with a down payment of $1 million paid at signing and a time-is-of-the-essence closing date for mid-April 2020. The terms of the contract were favorable to the seller and contained no representations as to whether any leases were in full force and effect. However, of the limited obligations set forth in the contract, the seller was required to deliver tenant estoppel certificates in a form reasonably requested by the client’s lenders or attached to the tenant’s lease.

The day prior to the scheduled closing, the seller provided an estoppel certificate from one of its tenants signed in early April 2020, stating that that it had not breached or defaulted under the lease and rent was current through March 31, 2020. When the client objected and requested that such tenant estoppel also address April 2020, the seller then provided a seller’s estoppel certificate as the lessor stating: “(a) there exists no breach of or default under the Lease, nor any condition act or event which with the giving of notice or the passage of time, or both, would constitute such a breach or default other than Lessee’s failure to pay rent due April 1, 2020, and (b) there are no existing claims, defenses or offsets against rental due or to become due under the Lease other than Lessee’s request for rent deferment due to COVID-19.” The client rejected such estoppel from the seller and the litigation ensued before the Supreme Court, New York County, Commercial Division.

The seller commenced the action for breach of contract and soon after moved for summary judgment, asserting that the client’s rejection of the estoppel certificates from the tenant and seller was improper. Evan and Lawrence opposed the seller’s motion and cross-moved for summary judgment arguing, among other things, that it was the seller who had breached by failing to deliver a conforming tenant estoppel. The court agreed with the client, i.e. being provided with conforming tenant estoppel certificates was material, especially in view of the lack of representations in the contract as to whether the leases were in full force and effect.

Ultimately dismissing the seller’s complaint and granting the client’s cross-motion, the court declared that the client was entitled to an immediate return of the $1 million down payment and confirmed that it had a valid vendee’s lien against the property. The court further awarded the client reasonable attorneys’ fees and costs.