Realty Law Digest

The plaintiffs (purchasers) had entered into a contract to purchase a cooperative (co-op) apartment. The co-op board (board) failed to approve the sale. This litigation involved the issue of whether the defendant seller (seller) may keep or must refund the purchasers’ $107,500 deposit. Since the purchasers had “falsely warranted, when entering into the contract, that they were not subject to any unpaid tax liens or money judgments,” the Court held that the seller was entitled to retain the deposit “as liquidated damages as provided for in the contract.”

More than five weeks prior to entering into the contract, the purchasers had submitted financial statements to the seller’s real estate broker. A purchaser had stated that he had “unsatisfied judgments for taxes and that these were ‘[t]o be paid before board package submitted.’” Thereafter, the parties entered into a contract of sale which provided:

Purchaser represents and covenants that:…there are not now and shall not be at Closing any unpaid tax liens or monetary judgments against Purchaser…. They further represented: “Purchaser, to the best of its actual knowledge, represents to Seller that Purchaser has had no material credit problems within the past five (5) years which would reasonably be expected to adversely affect Purchaser’s application for [co-op] Board approval…. In the event of Purchaser’s misrepresentation, the contract provided that “Seller’s sole and exclusive remedies shall be to cancel this contract [and] retain the Contract Deposit as liquidated damages….”