This was originally posted on the SGR Blog.
What Was Remedy If Mortgage Balances Exceeded Winning Bid?
It is not unusual in a hot suburban residential real estate market for an offering to morph into a “bidding war”- a de facto auction. And, on occasion, an auction is the sales method of choice from the start. But, as a recent case illustrates, a real estate auction sale may raise some unique factual disputes and concomitant legal issues.
Theodore Brois and Helene Brois authorized Concierge Auction, LLC, to conduct an auction of their property located at 3 Tallwoods Road in Armonk, New York, by an agreement dated May 21, 2018. The Auction Marketing Agreement provided that the auction “shall be conducted without reserve” and that the Brois, as sellers, “shall be obligated to sell the [property] to the highest bidder.” That agreement included a provision giving the Brois the right to cancel the auction, by written notice of cancellation and certain payments, which right expired at 12:00 p.m. on the day of the auction. The Broises pre-executed a contract of sale for the property on June 26, 2018. They also signed a document entitled an Auction Sale Acknowledgment on June 26, 2018, acknowledging that the highest opening bid was $1,500,000.
This was originally posted on the SGR Blog.
Contracts for the sale of real property usually contain so-called “conditions precedent” to closing. Contracts sometimes contain, as such a condition, a lender’s consent to the assignment of an existing mortgage on the premises. And, as a recent case illustrates, the failure of that condition raises a broad panoply of legal issues, in general, and contract-specific disputes, in particular.
Prosperous View LLC agreed to purchase a condo unit at 170 Mercer Street in Manhattan from 170 Mercer LLC for $6.7 million and paid the down payment of $350,000 (to be held in escrow). Prosperous contended that the sale was contingent on Prosperous being assigned an existing mortgage on the property. It argued that it complied with its obligation to apply for the mortgagee’s consent to assume the mortgage. And alleged that the mortgagee began demanding onerous provisions in order for the assumption of the mortgage to be finalized, including an additional security payment of $1 million to be placed on deposit for the life of the loan. Prosperous contended that Mercer refused to pay the additional cost of complying with that condition.
This article was originally published in the New York law Journal.
by Victor M. Metsch
Anything that can possibly go wrong, does.
Compulsive readers of advance sheets and decisions reported by the Office of Court Administration are exposed, on practically a daily basis, to the truism that, in mortgage foreclosure proceedings, given the opportunity, something will almost always go wrong.
The often microscopic examination of procedural and substantive claims by the Courts appears to be a result of the unique and complicated technical requirements of the proceeding; the sometimes suspect papers trails resulting from bank failures, regulatory interventions and bulk assignments; and the inability of mortgagees-by-assignment to parlay the necessary original documents with an acceptable chain of title and an affiant with personal knowledge of the facts.
As a result, the Courts now regularly and routinely deny motions for summary judgment in mortgage foreclosure proceedings in situations that, in the past, would have sailed through the civil courts without particularly close scrutiny. A few recent examples follow: Continue reading
This article was originally published in the New York Law Journal.
by Victor M. Metsch and Stephen W. O’Connell
Two recent decisions by Courts inKingsCountyandSuffolkCounty, published just days apart, remind us that mortgage contingency clauses in residential contracts of sale require meticulous drafting by counsel, informed understanding and approval by prospective purchasers, and literal compliance in order to avoid forfeiture of the often substantial down payment.
In one action, the buyer lost her deposit. And, in the other proceeding, the down payment was returned. Both decisions turned on the reciprocal obligations of the parties to a contract to be completely candid with each other during the contract negotiation process, on the one hand, and to keep each other fully informed of all material subsequent events after the agreement is signed, on the other. Continue reading