April 13, 2015

On November 13, 2014, the New York State Appellate Division, First Department, decided the case entitled, Honua Fifth Avenue, LLC v. 400 Fifth Realty, LLC, 122 A.D.3d 434 (1st Dept. 2014), dismissing defendant seller’s counterclaim that plaintiff purchaser had wrongfully terminated the residential contract of sale (“Contract”).

Plaintiff had requested an adjournment of the closing date to allow the parties to collaboratively investigate air infiltration defect issues.  Defendant seller refused after plaintiff declined to provide a copy of its written expert report.

The seller argued that the purchaser had no right to delay the closing because the Notice of Closing attached an architect’s Certificate of Substantial Completion in accordance with the Contract.

The Court disagreed, finding that under section 9.3.1(c) of the Contract, plaintiff would not be required to close if any representation by defendant was false and had a “material adverse effect on [the fair market] value” of the lower residential units at issue. Issues of fact exist as to whether defendant performed its obligations under the agreement in all “material” respects and whether the alleged air infiltration defect had a “material adverse effect” on the fair market value of the lower residential units.

The Court held that the purchaser’s expert’s affidavit, which cited to specific sections of the New York City Building Code, was sufficient to raise issues of fact as to the existence of an air infiltration defect, whether defendant violated building code provisions related to the infiltration of air, and whether the alleged defects and violations constituted a material breach under the Contract.

If you have any questions about residential contracts of purchase and sale, please do not hesitate to contact an experienced attorney at (914) 338-8050 or e-mail keith@betenskylaw.com.  For more information about the firm, please visit www.betenskylaw.com.