Salient Ancillary Issues in New York Real Estate Contracts

By: Michael Siegel, Esq.

In this Blog we highlight salient concerns in the practice of Real Estate Law that we protect our clients against.

In our last Blog we described the basic issues in a Real Estate Contract: The ability to Buy and Sell property free and clear of legal encumbrances. In this Blog we highlight salient concerns in the practice of Real Estate Law that we seek to protect on behalf of our clients.

One issues I am concerned with is what happens if a buyer comes down with a terminal illness while in contract. This is always salient, but it is particularly salient today with the sudden spread of the Wuhan strain of the novel Coronavirus. The legal issue is whether or not someone who contracts a terminal disease defaults on a contract if they cannot complete the purchase because of their illness.

Every standard NY Real Estate contract contemplates, “purchaser’s default.” If a Purchaser defaults on their contractual obligations their down payment becomes liquidated damages for the Seller. If you insert the word “willful” between the words purchaser and default the term takes on a different meaning. If you define the term willful it is even better. We like to define willful in terms of what it doesn’t mean for the purposes of a terminal illness, and thus add a clause that says “willful shall not mean death or catastrophic illness.” These days we are even adding illness or loss of employment due to the novel corona virus

If you add willful to the Purchaser’s default paragraph and qualify what it doesn’t mean the buyer is now protected if a sudden serious illness occurs.

Another issue we are always concerned with is timing. Let’s face it - stuff happens! As it turns out it is nearly impossible to set and live with a specific closing or mortgage commitment date in a Real Estate Contract. The standard language in a Contract is therefore “thirty days” for the issuance of a mortgage commitment, and then “on or about” for the specified closing date.

We in the practice of Real Estate Law have wrestled with exactly what "on or about means," however the most common interpretation of that clause is within thirty days of the specified date. The issue becomes what if we go past either of these dates or understandings. In order to further protect the purchaser and the seller we generally add a clause allowing for the parties the option to either agree to extend the date or cancel the contract. In this way another cause for default is mitigated.

A third issue that concerns us is based on environmental concerns. There are less of these than there used to be, but what if there was a spill on the property that violates an environmental law. The most common spill that occurs on residential property is from a leaking fuel oil tank. We, therefore, pay careful attention to whether or not a property has an oil tank and where it is located. Properties that still have underground, or outside, oil tanks should be a subject of curiosity.

If we find, between a contract and property inspection, that this has not been addressed, we generally request a contract clause allowing the purchaser to cause a pressure test on the fuel oil tank within a fixed time period. If an outside oil tank cannot hold pressure it is a candidate for further investigation. This is, potentially, an expensive endeavor if oil has leaked into the ground. We, therefore, generally give the seller the option of either providing a certificate from a certified inspector that there either is no leak, or that any leak has been cured and mitigated in compliance with environmental regulations, or the option of cancelling the contract if they don’t want to deal with it, and it so, granting the purchaser the option of dealing with the risk themselves. In this manner finding a spill does not have to lead to a default of the contract.

While these are only three instances of unique situations that one might come across while buying or selling a home, there are many other unique situations that pop up. With over 20 years of Real Estate Contract experience we've seen it all, and can walk you though any problems that might arise, while also protecting your interests in the transactions.

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About The Author

Michael R. Siegel is an Attorney and Counselor at Law, Licensed to practice in the State of New York, the Eastern and Southern Federal District Courts in New York, and the Supreme Court of the United States of America.  He received his Juris Doctorate from the Benjamin N. Cardozo School of Law, Yeshiva University in May of 1999, and has been in private practice since January of 2000. Prior to becoming an attorney he was an administrator at New York City Parks and Recreation where he had a long career in Public Service, starting as a New York City Urban Park Ranger in 1979, he became a Mounted Urban Park Ranger, NYC Park Historian, Assistant to the Brooklyn Borough Commissioner of Parks, Director of Capital Projects for Brooklyn Parks, and was Chief of Staff for Brooklyn Parks when he left Parks & Recreation to attend Law School in 1996.