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china_shanghai_stock_market_crash_recessionDo you have a hangover? Not that kind.  You’re on your own if you partied too hard.  I have no magic formula to cure what ails you.  No, I’m talking about the overhang that lingers from THE CRASH that took the real estate market along with it.  Were you one of the people who signed a multi-million dollar contract for the apartment of your dreams before the market tanked only to be confronted with the nightmare of closing after the world had changed?

Some of those unlucky buyers walked, others balked, or tried to renegotiate.  Some are only now filing complaints against sponsors of new luxury condominiums, while others are awaiting the results of suits previously filed.  So what are your rights?  Does the law have a heart (no snickering, please) or will it leave you out to dry?

One unhappy purchaser got a lump of coal from the court for the holiday just past.  In November 2007 she signed a contract for a $2 million luxury condo in a new Brooklyn waterfront development that was to be delivered by September 30, 2008, putting down a deposit of nearly $200,000.  She got notice in August 2008 of an October closing.  Then came THE CRASH.  The traumatized buyer didn’t show up for the closing, which had been postponed till November, claiming she was off the hook because the sponsor had fraudulently misrepresented that the apartment was ready by the drop dead “outside”date of September 30th, when, in fact, it had not obtained a Temporary Certificate of Occupancy till October 15.

I feel your pain, the judge recently told her, acknowledging that the value of the apartment had sunk from $2 to $1.3 million, but there’s nothing I can do because the C of O was a public record so you should have looked.  The sponsor got to keep her $200,000, and the buyer got hit with a double whammy – a hit to her portfolio, plus loss of her deposit.

The buyer at a Downtown condo managed to stave off defeat by convincing the court that the closing on the first unit might have been a sham, thus allowing his claim against the sponsor for rescission and refund of his deposit to proceed.

9-11-pic1Similar arguments were made post September 11, most particularly by the Uzans, those billionaire brothers who bought a bundle of penthouses at Trump World Tower, practically before it was a hole in the ground, putting down a deposit of $8 million, representing 25% of the apartments’ total price tag.  Then came the collapse of The Twin Towers.  They didn’t show up for the closing in October 2001, arguing that the terrorist attack relieved them of their obligation to go through with the transaction, and entitled them to a refund of their deposit.  A deal’s a deal, the court told them, and both sides had enough lawyers to protect them from come what may.

While the risk of falling victim to some cataclysmic event is greater when buying into new developments where the time lag between contract and occupancy can be years, not months, it can happen even if you’re buying an existing apartment from a selling shareholder.

Timing is everything, as a couple in a Fifth Avenue co-op found out. In July 2008 they agreed to buy their next-door-neighbor’s apartment, hoping to expand their empire.  Only when it came time to close in November, they said that the economic crisis precluded them from getting a loan, an argument that got them nowhere because the contract didn’t provide for a financing contingency, but enabled their neighbor to keep the $300,000 deposit, not a formula for brotherly love.

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