Real Cases in Real Estate by Andrea Lee Negroni, Esq. – June 6th Update

Real Cases in Real Estate by Andrea Lee Negroni, Esq. – June 6th Update

Real Cases in Real Estate is a weekly update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

Followers of Real Cases in Real Estate will learn and be entertained by lawsuits involving nuisance, trespass, zoning violations, deed restrictions, title insurance, public utilities, mechanics liens, construction defects, adverse possession, foreclosure and eviction, divorce and marital property rights, tenants' rights, and more. Real Cases in Real Estate uncovers the unpredictable, amusing, and sometimes outrageous disputes between next-door neighbors, contractors and homeowners, condo boards and residents, real estate brokers and homebuyers, and zoning administrators and developers.

Each fully cited case summary highlights the essential law of the case and explains the principal legal theories and concepts relevant to the outcome. Plain language treatment makes Real Cases in Real Estate accessible to lawyers and laymen alike.

Whether you follow real estate law professionally or as a hobby, you'll find something new and useful every week in Real Cases in Real Estate.


Updates for the Week of June 6th, 2011

Property Seller Wins Summary Judgment for Amount of Buyer's Bounced Down Payment Check.

Peter D'Alesso contracted to buy Ramon Torres's Fire Island New York property for $1.2 million, giving a $120,000 check to the seller's attorney for the down payment. There was no financing contingency in the contract, but the buyer apparently told the seller's lawyer not to deposit his check until he gave the word that the cash was available. The seller's lawyer said he would not deposit the down payment check until the contract was signed by the seller. The seller signed the contract and delivered it to his lawyer 12 days after the down payment check was written. The check was deposited, and it bounced.

A week later, the buyer's lawyer advised the seller's lawyer that the buyer would not be proceeding with the contract. The seller sued the buyer for the $120,000 down payment represented by the bounced check. Summary judgment was granted to the seller, the buyer appealed and the judgment was affirmed. The legal issue involved was whether a real estate contract with express language prohibiting oral modifications is enforceable as written. The buyer claimed the seller's alleged oral agreement not to deposit the check was a condition that became part of the real estate contract or that precluded its enforceability.

It seems that the buyer intended to obtain a home equity loan and use the proceeds for the down payment on the Fire Island property. As the sales contract wasn't conditioned on financing, the buyer's attempt to invalidate the contract was seen as an attempt to insert a financing contingency into the deal after the fact.

The case illustrates the real estate exception to the rule on admissibility of parol testimony to contradict the terms of a written agreement. While acknowledging that parol testimony may be admitted to prove conditions precedent to the effectiveness of a written contract in some situations, the New York Supreme Court, Appellate Division, noted that real estate contracts are subject to different rules. Real estate contracts are treated differently because of public policy considerations - the same policy considerations that underlie the statute of frauds for real estate contracts. That is, real estate contracts must be in writing for purposes of clarity, certainty and fraud avoidance. As the court noted, "if we permit interference with enforcement of a written and fully executed real estate sales contract based on a claimed oral condition precedent to its effectiveness, the need for certainty and finality at the heart of the statute of frauds is undermined."

The court also noted that the merger clause in the contract, which states that the parties' writing contains the entire agreement, is not mere boilerplate. And in a professional rebuke to the buyer's lawyer, the court noted that it was "unusual, not to say sloppy," for the lawyer to have allowed his client to deliver a signed contract and down payment to the seller's lawyer while simultaneously proposing a new oral condition for the written contract. Had two lawyers negotiated the contract, the request for a delay in depositing the down payment would have been negotiated into the agreement rather than forming the basis of a lawsuit seeking to reform a written agreement.

Lexis.com subscribers can view the enhanced version of Torres v D'Alesso, 2010 NY Slip Op 7127 (N.Y. App. Div. 1st Dep't 2010)

Non-subscribers can use lexisOne's Free Case Law search to view the free, un-enhanced version of Torres v D'Alesso, 2010 NY Slip Op 7127 (N.Y. App. Div. 1st Dep't 2010)

 

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