May a sponsor intentionally delay a condo unit closing?
September 22, 2014 - Front Section
The plaintiff signed the contract in December of 2012 when the unit was virtually complete. The sales agents advised that the unit was "basically finished" and that a temporary certificate of occupancy was "imminent" permitting a closing "very soon," perhaps as early as January of 2013. However, evidence showed that work had slowed. The sponsor quickly advised that construction was a "few weeks behind" and predicting a mid February 2013 closing. With no closing by April of 2013, the purchaser started writing complaint letters. The TCO was ultimately issued September 6, 2013 and the sale closed October 16, 2013. But in the meantime the purchaser's interest rate on his financing had increased causing plaintiff to sue for damages including those arising due to the higher rate and for interim living costs. During this period the sponsor had offered to let the purchaser rescind his contract. The offering plan for the building estimated a closing on or about July 1, 2012 but various disclosures in the plan warned of the possibility of delay, although the plan required the sponsor to proceed "diligently and expeditiously to complete construction."
The sponsor moved for dismissal of the complaint. Procedurally the court had to assume that the allegations that the sponsor intentionally delayed the closing were true. The court issued a split decision knocking out the claims relating to the increase in the purchaser's interest rate in part due to various plan disclaimers relating to the potential increase in the cost of mortgage financing. The court, however, let survive the purchaser's claim for additional living costs, assuming the plaintiff could prove an intentional delay. The rest of the complaint was dismissed. So the answer in this court's opinion is, yes, a sponsor may be liable for damages for an intentional breach of contract by failing to diligently pursue completion and closing of a unit although damages may be limited.
Tom Kearns is a partner at Olshan Frome Wolosky, New York, N.Y.