Blank Rome Wins Summary Judgment Motion for Property Owner, Developing Law on “Time of the Essence” Closings
Blank Rome successfully represented real estate company TBD Five Management, Inc. (“Seller”) in a contested purchase and sale dispute of a commercial development site in the heart of the popular Brooklyn neighborhood Carroll Gardens and has further developed the law on “time of the essence” closings.
In June 2022, an Argentinian development group, TH-22-Carroll LLC (“Buyer”), entered into a contract of sale to purchase the subject property from Seller for the initial purchase price of $14 million, with the parties originally set to close on the sale on August 1, 2022. Since the Buyer had difficulty procuring necessary funds from its investors, Buyer did not have the financial wherewithal to close on the original closing date and the parties negotiated three separate extensions. As a consequence of the extensions, the purchase price was increased to $14.5 million and Buyer agreed to pay Seller an additional $450,000 over the $100,000 deposit made upon signing of the original contract for liquidated damages that would be retained by Seller if Buyer failed to close on the extended closing date of August 2, 2023. After Buyer failed to close on the extended closing date, Seller deemed the contract terminated and retained over half a million dollars in the Buyer’s funds that were paid under the contract. Thereafter, the Buyer brought suit for specific performance seeking to compel the sale of the property alleging that Seller breached the contract of sale by failing to deliver in escrow a confirmatory deed and affidavit of title, as required by Buyer’s title company. Buyer simultaneously filed a lis pendens against the property, encumbering title on the property. Following the filing of suit, the Buyer attempted to manufacture a new closing by notice dated December 12, 2023, purporting to establish a closing date of January 2, 2024. Seller rejected the newly manufactured closing date and immediately moved for summary judgment to dismiss the complaint and to cancel the lis pendens of record.
The Blank Rome team won the lawsuit on summary judgment by showing that the alleged title issues were mere ministerial acts incident to closing, which the court found were a “red herring.” Hence, the Seller was entitled to terminate the contract and to retain the deposit monies. This decision created new case law concerning the enforcement of “time of the essence” closing deadlines in commercial property purchase and sale agreements where minor title issues remain outstanding. The decision also signaled a total victory for the firm’s client, allowing Seller to move forward with other development plans while retaining the prospective Buyer’s substantial forfeited deposit.
The Blank Rome team was led by Real Estate industry group co-chair Massimo F. D’Angelo and Robert Chester made key contributions.