Do I have a case to litigate and pursue a co-op seller to return the escrow deposit?

Asked over 1 year ago - New Hyde Park, NY

The seller attorney has taken a $18,000 deposit and will not return it.
The co-op board approved my application. Chase bank had given me a commitment letter. However, the bank would not accept a flip tax of over 5%. This co-op board demanded a tax of 15%. I have not been able to find any bank that is willing to approve this rate. In addition, the fidelity bond of this co-op does not qualify for the bank’s standards.
At this point, the seller is indicating that I have breached my Contract of Sale by not being able to close by a certain date and they are now taking the deposit as liquidated damages.
Would I be able to demonstrate that the seller and co-op board presented me with a "no-win" situation in light of the exorbitantly high flip tax that no bank would accept?

Attorney answers (7)

  1. Steven Warren Smollens

    Contributor Level 20

    9

    Lawyers agree

    1

    Best Answer
    chosen by asker

    Answered . Dear would I be able to demonstrate?

    Your transaction attorney should explore all available options to resolve the contract dispute. If not resolvable by a negotiation, your final option is sue for the recovery of the contract deposit.

    The attorney for the seller holding the deposit is considered an escrowee. If the seller declared you in default for the bank's failure to fund, his responsibility is to notify you that his client, the seller, has declared a default and requested the release of the contract deposit to the seller.

    You and your attorney would respond by stating that purchaser is not in default as the funding was refused due to the bank's technical objections to the cooperative's rules and fidelity bond. The contract likely provided for this contingency, and if so, the purchaser is not in default.

    Once you and your attorney declared your objection to the seller's claim, and you are not able to resolve the issue, some person involved in the transaction will need to commence a lawsuit.

    You and the seller will quickly realize that a litigation over entitlement to an $18,000 contract deposit may be more costly than compromise, or the seller giving up the claim. Courts are not easily inclined to hold a purchaser in default if the "bank' is the problem.

    Good luck.

    The answer provided to you is in the nature of general information. The general proposition being that you should... more
  2. Mitchell Aaron Nathanson

    Pro

    Contributor Level 15

    7

    Lawyers agree

    1

    Answered . If you had a lawyer representing you on this purchase he should be the one to advise you. If he does not do litigation, then at least he will know the facts as to whether the contract provides for return of the down payment. It sounds like the commitment was conditional, but the facts and contract must be further examined. The best answer I can give to you is 'maybe."

    I do NOT know you. I am NOT your lawyer. This answer is provided for the general public who may have similar... more
  3. Eric Edward Rothstein

    Contributor Level 20

    7

    Lawyers agree

    1

    Answered . Does the contract have a mortgage contigency clause? If YES, it sounds like you should get your money back. If NO, you are out of luck if you don't have the funds to close.

    I am a former federal and State prosecutor and now handle criminal defense and personal injury/civil rights cases.... more
  4. Jayson Lutzky

    Pro

    Contributor Level 20

    6

    Lawyers agree

    Answered . Speak to your real estate attorney and have him advise you. Good luck.

    If this answer is helpful, then please mark the helpful button. If this is the best answer, then please indicate... more
  5. Michael David Siegel

    Pro

    Contributor Level 15

    5

    Lawyers agree

    Answered . You need to file a lawsuit. In Nassau County, where it appears you are from, $18,000 puts it in Supreme Court. If in NYC, you are in Civil Court. I believe you have a claim for return. However, you are suing the seller, not the lawyer.

  6. Roman Leonov

    Contributor Level 8

    5

    Lawyers agree

    Answered . Mr. Rothstein is on point. I had 2 cases with exact same facts recently. RE deposits in NY are strictly designed to keep an option to buy for the proposed buyer. Take a look at the contract. Most have a mortgage contingency clause, and also, sometimes define what a "commitment letter" is, or is not. Many times, a commitment letter contingent on an appraisal etc, is not a "firm commitment letter".

    Make sure your RE attorney reviews this and notifies the seller's attny of your rights to cancel the contract ASAP prior to the sellers making "time of the essence" demand.

  7. Jeanne Reardon

    Contributor Level 7

    5

    Lawyers agree

    Answered . If you have a lawyer get him/her to review your contract. If you don't have a lawyer, hire one. Usually most co-op contracts of sale in their financing provisions allow a buyer to cancel the contract and get back their down payment if any requirement of the Loan Commitment Letter other than one concerning purchaser is not met (e.g. financial condition of the Corporation, owner occupancy quota, reserves etc.). Have your attorney write a letter to seller stating that you complied with all the conditions of your mortgage commitment and are not in default, that the bank's failure to fund concerns the financial condition of the co-op corporation-- not you, and demand the return of your down payment. Courts do not look favorably on forfeiture of the down payment due to the bank's objection to the rules of the co-op corporation. Hopefully seller and their attorney will see the light before it gets to that point.

    Legal Disclaimer: By using or participating in this site you understand that there is no attorney-client... more

Can't find what you're looking for? Ask a Lawyer

Get free answers from experienced attorneys.

 

Ask now

28,159 answers this week

3,128 attorneys answering

Ask a Lawyer

Get answers from top-rated lawyers.

  • It's FREE
  • It's easy
  • It's anonymous

28,159 answers this week

3,128 attorneys answering