Thank You For Submiting Feedback!
More than a century ago, it was held that a vendee who defaults on a real estate contract without lawful excuse cannot recover his or her down payment.
Plaintiff Turkish billionaire brothers agreed to purchase two luxury penthouse condominiums, each on the 90th floor of the tallest residential building in the world. After the terrorist attacks on the World Trade Center, the brothers defaulted on the purchases. The brothers filed an action seeking a declaratory judgment that defendant limited partnership's retention of their 25 percent down payment, after default, for four luxury penthouse condominiums was an unconscionable, illegal, and unenforceable penalty. The Supreme Court, New York County (New York), denied the partnership's motion for summary judgment. The partnership appealed.
Did the brothers, who defaulted on the purchase of four luxury condominium units, forfeit their 25 percent down payment as a matter of law?
The appellate court held that the brothers were not entitled to a return of any portion of their down payment. The down payment was a specifically negotiated element of the contracts, and an arm's length transaction. The parties were sophisticated businesspeople, represented by counsel, who spent two months at the bargaining table before executing the amended purchase agreements. Further, it was customary in the pre-construction luxury condominium industry for parties to price the risk of default at 25 percent of the purchase price. The purchase agreements included a detailed non-refundable down payment clause, to which the brothers' counsel had negotiated a specific amendment. Finally, there was no evidence of a disparity of bargaining power, or of duress, fraud, illegality, or mutual mistake by the parties in drafting the down payment clause of the purchase agreements.