Realty Law Digest

The defendant seller (seller) had agreed to sell three properties on which the seller planned to build “three three family homes” to the plaintiffs (purchasers). Each contract specified a “purchase price of $430,000 and a $15,000 down payment, to be held in escrow pending the closing.” The seller was obligated, as a condition to the closing, to deliver “certificates of occupancy [C of O] for the dwellings that it planned to build, or obtain ‘appropriate sign-offs’ to show that [C of O's] would be forthcoming.” Each contract had a mortgage contingency clause which provided that “if the [purchasers] did not obtain a mortgage commitment within 60 days from the date of the contract, either the [purchasers] or the seller ‘may cancel this contract by giving Notice to other party.’”

The contracts were signed on March 12, 2003, and specified a closing date of July 1, 2003. Apparently, “essentially nothing happened for more than three years after the contract was executed. The dwellings were not built and the mortgage commitments were not obtained.” The seller asserted that once the 60 days had passed, “it was free to terminate the contracts at any time under the mortgage contingency clause….” However, the seller did not claim to have exercised its right until four years later. The purchasers asserted that “the seller had no right to terminate, because the seller’s failure to build houses on the properties, and to obtain [C of O's] or appropriate sign-offs, made getting mortgage commitments impossible.”