Force ‘Em to Sell! The Right to Specific Performance

In the typical real estate transaction, the seller is interested in selling the property, the buyer is interested in buying it, and the Contract of Sale is merely used to memorialize the deal and as the basis for the buyer to obtain a mortgage commitment from a mortgage lender. The closing takes place; everyone leaves happy!

Sometimes, however, the seller fails or refuses to comply with the Contract of Sale and sell the property to the buyer. In that circumstance, the legal ramifications of the Contract of Sale come into play. This was the situation in a recent case litigated by Richard A. Klass, “Your Court Street Lawyer,” and decided in the Supreme Court of the State of New York, County of Nassau last month.

In Korzeniewski v. Estate of Poswolsky, the plaintiff wanted to buy a house in Long Beach, New York. Through a local real estate broker, he found a nice house owned by an 86-year old man looking to sell his house so he could downsize to an apartment. The Contract of Sale was signed, with a sale price of $465,000, in October 2003. Each side had been represented by counsel.

In November 2003, the owner/seller entered into the Nassau University Medical Center complaining of pains, and a pacemaker was installed. The medical records of the hospital had notations that the seller was sometimes disoriented and suffering from dementia. In December 2003, after voluntarily checking himself out of the hospital three weeks earlier, the owner died.

After the owner’s death, his son was appointed the executor of his estate by the Surrogate’s Court. The son/executor informed the buyer that he believed that the real estate broker took advantage of his father, and that the house was really worth more than $200,000 above the original $465,000 sale price. Accordingly, the son disavowed the Contract of Sale, indicating that he would only sell the property to this buyer if he paid the additional moneys.

Real estate is “unique property”:

One of the tenets of contract law is that real estate is considered a “unique” property – one which cannot be substituted with another. That is, just like a snowflake, one piece of property is not the same as any other. Since the house is unique, and no monetary award for breaching of the contract would satisfy the buyer, the buyer brought an action for specific performance against the son/executor. The substance of the action was the request for the judge to direct the executor to “specifically” perform the contract and transfer the Deed to the property for the original sale price.

Lack of evidentiary proof of dementia:

At the conclusion of discovery in the case, including the taking of depositions of the parties and the attorney for the owner/decedent (who happened to be a distant cousin of the owner), a motion was brought for summary judgment in favor of the buyer, awarding him specific performance of the contract. Attached as part of the proof in support of the motion was the petition filed by the executor with the Surrogate’s Court, in which he indicated that the value of the house was $500,000 at the time of death (less than 10% more than the sale price negotiated four months earlier).

In response, the executor put forth two proofs that his father was suffering from dementia and, therefore, lacked the mental capacity to sign the Contract of Sale, namely: (a) the medical records from Nassau University Medical Center (where the notations of dementia appeared in the records); and (b) the affidavit of a neurologist who neither examined the decedent nor consulted with any of his personal physicians, but relied solely upon the medical records which post-dated the signing of the Contract of Sale.

No need for a trial – just make the seller perform the real estate contract:

In granting summary judgment to buyer (which meant that the judge did not believe that there existed any factual issues to be decided by trial), the judge enforced the terms of the Contract of Sale to make the executor “specifically” perform the contract and sell the property for the original sale price. Relying upon case law, the judge found that the buyer proved that he “substantially performed [his] contractual obligations and was willing and able to perform the remaining obligations, that defendant was able to convey the property, and there was no adequate remedy at law.”

In disregarding the executor’s proofs, the judge found that he did not meet his burden of proving that the decedent was incompetent (in order to refute the presumption that people are considered mental competent and capable of making a contract). According to well settled law from the NYS Court of Appeals (Ortelere v. Teachers’ Retirement Board), the focus of the inquiry is whether the person’s mind was so affected as to render him wholly incompetent to comprehend and understand the nature of the transaction at issue. In this case, the executor did not offer any proof that his father was so affected by dementia that he was unable to enter into the Contract of Sale. Further, there was no proof that he was forced or coerced into signing the contract.

— by Richard A. Klass, Esq.

©2007 Richard A. Klass. Art credits: Der Steigbügel. Artist: Giovanni Fattori. Marketing by The Innovation Works, Inc.

-----------
copyr. 2011 Richard A. Klass, Esq.
The firm's website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.

Court Upholds 25-Year Lease at Fixed $800 Rent

In Borough Park, there lived an elderly couple in a house (the Kimmels). Their neighbor (Twersky) was interested in renting the first floor apartment for her son and his family. At the time that she rented the apartment, it was in poor shape and in very poor condition; indeed, the entire house needed extensive renovations. In 1995, Twersky and the Kimmels entered into a lease agreement to rent the first floor apartment.The lease agreement provided that the monthly rental amount was to be $800, and the lease term was for 25 years. As indicated in the lease agreement, throughout this time, the rental amount would not increase. Unstated in the lease agreement, however, but alleged by Twersky as a material aspect of the 25-year term at a low fixed rent was the fact that she needed to invest over $100,000 into the extensive renovation of the house, including a complete gut renovation of the first floor apartment. Separate from the lease agreement, Twersky entered into an Option to Purchase Agreement with the Kimmels, which would allow Twersky to purchase the entire house for $325,000 less rent paid until exercise of the option but in no event less than $300,000 (which option agreement was held unenforceable by the court).

Unconscionability Argument Fails:

The matter wound up in litigation after the elderly couple passed away and the executor of the surviving spouse’s estate (Kazaks) brought a “holdover” proceeding in Housing Court to evict Twersky from the apartment. Twersky then filed an action in the Supreme Court seeking an injunction to prevent Kazaks from evicting her family. Twersky relied upon both the option and lease agreements in her Complaint. Kazaks, for her part, claimed that (a) the 25-year lease was unenforceable as a matter of law; and (b) the purchase option agreement was unenforceable because not all of the heirs at law of original owners of the house signed it but just the Kimmels (who owned a portion of the house). She put forth two arguments concerning the lease: that, by law, a lease of 25 years with no rent increases throughout the term was unconscionable; and that the elderly couple suffered from various ailments and diseases during and after the time of lease execution.In making his decision, the trial judge (Justice Knipel) properly found that the lease agreement between Twersky and the Kimmels was valid and enforceable. The arguments by the executor that the lease agreement was unconscionable and should not be enforced pursuant to Real Property Law §235-c was determined to be without merit, and not supported by the evidence presented at trial. As Justice Knipel observed, the executor was “doubtless correct that a residential lease for a 25-year term is unusual, especially where, as here, no increases were provided for the entire term.”Real Property Law §235-c provides as follows:

1. If the court as a matter of law finds a lease or any clause of the lease to have been unconscionable at the time it was made the court may refuse to enforce the lease, or it may enforce the remainder of the lease without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

2. When it is claimed or appears to the court that a lease or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its setting, purpose and effect to aid the court in making the determination.

In Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1, 10 [1988], the NYS Court of Appeals (New York’s highest court) held, “An unconscionable contract has been defined as one which ‘is so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforceable according to its literal terms (See 1 Corbin on Contracts, § 128, p. 400.).’” As further enunciated by the Court, a determination of unconscionability generally requires a showing that the subject contract was both (a) procedurally and (b) substantively unconscionable when made, i.e., “some showing of an ‘absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.’” Gillman, supra at p. 10.At trial, Kazaks had not proven that the lease agreement was either procedurally or substantively unconscionable, by the standards set forth by the NYS Court of Appeals. There was no proof adduced at trial that there was an absence of meaningful choice or that the terms of the agreement were unreasonably unfavorable. On the contrary, all of the witnesses testified that the Kimmels were competent to act in their own affairs, and that the lease agreement was negotiated (including the 25-year term contained therein). Accordingly, Justice Knipel held “the court concludes that the lease is valid on its face and is enforceable.”

Appellate Division Ruling:

Richard A. Klass, Your Court Street Lawyer, was retained by Twersky to defend the appeal brought by Kazaks. By the decision of the Appellate Division, Second Department, Twersky v. Kazaks, 868 NYS2d 912 [12/16/08], the appellate court ruled that the executor could not prove that the estate was an “aggrieved” party because the two causes of action in the original action were dismissed. Accordingly, the Appellate Division dismissed the appeal of Kazaks. Further, the Court affirmed (upheld) the decision after trial by Justice Knipel.By affirming the decision of Justice Knipel, the Appellate Division held that the 25-year lease at a fixed rent of $800 will remain in effect, and that Twersky may enforce the same in any future Housing Court proceedings between the parties.

— by Richard A. Klass, Esq.

©2009 Richard A. Klass. Art credits: page one, Image from Foster, Tony (2008-09). "John Romney, Artist-Engraver (1785-1863)". Cheshire History. Showing a house in Watergate St., Chester, England.

-----------
copyr. 2011 Richard A. Klass, Esq.
The firm's website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.

Seward Park apartment for $33K: "Too Good to be True"

From The Low Down, news from the Lower East Side:

Grand St. Apartment for $33K: Too Good to be True
"...By contrast, a similar case that Salamon’s attorney, Richard Klass, is handling a few blocks away at the Hillman Housing Corp. has garnered no press attention. In that case, plaintiff Elena Slukina of Manhattan bid $180,000 on apartment #GD at 550H Grand St. in April, after the previous owner defaulted. Hillman is attempting to block that sale based on arguments similar to Seward Park’s, according to court documents filed in Supreme Court Sept. 16...."

Read more here:
http://www.thelodownny.com/leslog/2011/12/a-grand-street-apartment-for-33000-too-good-to-be-true.html/trackback


-----------
copyr. 2011 Richard A. Klass, Esq.
The firm's website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.