The Supreme Court of New York recently ruled that even dead people must close on real estate deals they initiate.
Glennette Altman signed a contract in May 2005 to buy a co-op in an 89-unit building on Manhattan's Upper East Side for $2.3 million in cash. Before she could move in-or even finish the paperwork for closing-she died in September 2005 after suffering a stroke. Within the month, her heirs asked the sellers to return a $230,000 down payment. The sellers said no, if Altman's estate did not close on the property it would be in default.
And so the matter went to court–for four years–with appeal following upon appeal until this final ruling was issued in December.
Of course, the whole brouhaha could have been avoided had the buyer made one change to her contract.
According to Neil Garfinkel, the partner-in-charge of the real estate and banking practices at the New York law firm of Abrams Garfinkel Margolis Bergson, putting something as simple as the following in the contract could suffice:
"In the event of the death of Purchaser before closing, then the executor or administrator of Purchaser's estate, shall have the sole right to terminate this Contract provided written notice of termination is sent within thirty (30) days after the occurrence of such death. All respective obligations of the parties under the Contract shall thereupon cease and be of no further force and effect and Purchaser's estate(s) shall immediately obtain a full refund of the Contract Deposit."
As is turns out, the sellers, Kenneth F. and Diane F. Kaplan, were able to argue that the contract was binding for Altman's heirs because her lawyer didn't add any such clause to it. In fact, it did just the opposite.
The contract explicitly said that it would be binding upon the buyer's "heirs, personal and legal representatives and successors in interest." The sellers also argued that, as required by the contract, Altman had already submitted her application to the co-op's board of directors. The board had interviewed her and approved the sale before she passed away.
So in the end, the appellate division of the Supreme Court upheld the previous ruling for summary judgment in the sellers' favor and dismissed the case.
Herbert Appel, the co-op board president at 1150 Park Avenue, testified at the trial that the estate did not submit an application to go forward with the sale, and if it had, the board would have considered it.
The best bet for the heirs might have been to submit their application and name as the new occupant, say, a 20-something punk rocker cousin who likes to hold nightly band practice at home. The board probably would have rejected the revised application and gotten the heirs their deposit back. Or they could have told the board they planned to rent the unit out by the week to tourist families visiting New York.
In the end, says Garfinkel, the owners wound up finding another buyer to step in and buy the place in 2006 for $2.125 million. They'll need the cash to pay their legal bills.