In a decision that was handed down on August 14 (and appears in today's edition of the New York Law Journal), Kings County Justice Ann Pfau held that after the purchaser of a property failed to close as called for in the contract, and by the "time of the essence" letter issued with regard to the closing, Brooklyn Law School was entitled to retain the purchase's downpayment - which exceeded $1.25 million - as liquidated damages.
Lest you think that the Court undertook this lightly, Justice Pfau's detailed recitation of the facts involved makes clear that Brooklyn Law School acted appropriately, and went out of its way to accomodate the purchaser; the purchaser, on the other hand, was in tacit breach of the agreement.
Pursuant to the Agreement, the purchaser requested access to inspect the Property forty-six times, and they physically inspected the Property forty-three times, the last six inspections being held in the two weeks before the scheduled closing date. On the final inspection, BHC's representative expressed to BLS's superintendent, who was present, that BHC was happy with the condition of the Property, and it made no complaints.
But that wasn't enough for the purhcaser.
After 6 pm on the evening before the closing, the purchaser's attorney sent a request by e-mail for another inspection to be held 1 hour before the closing, but the seller's attorney responded that "Unfortunately, there is no one available to give the purchaser access tomorrow morning before the closing…Making a request for access at 6:24 pm the night before a 10 am closing is far from reasonable. I will see you in the morning…." (id.). The next morning, less than 1 hour before the scheduled closing, the purchaser hand-delivered a letter to Brooklyn Law School's dean, stating that "Please be advised that [BHC] hereby declares a default by [BLS] of the Agreement by virtue of its refusal to provide access to Purchaser as provided in Article 37 of the Agreement."
In finding that Brooklyn Law School was entitled to retain the deposit as liquidated damages, the Court stated as follows:
"[The purchaser] argues that summary judgment should be denied because it is entitled to engage in discovery to determine if BLS was obligated to honor the August 31 request for an inspection before the closing. However, there are no disputed material facts leading up to the breach. "The determination of what is a reasonable time is usually a question of fact, but when there are no disputed facts, what is a reasonable time becomes a question of law, and the case is a proper one for summary judgment" (Spagna v. Licht, 87 AD2d 626, 627 [2d Dept 1983]). Under these circumstances, BLS provided reasonable access to the Property under the terms of §37, and [the purchaser's] refusal to appear at the closing constituted a breach of the Agreement as a matter of law.
"Morever, BLS acquiesced to [the purchaser's] demand for an additional inspection on the day of the closing, and offered to delay the closing for four hours while BHC conducted a final inspection. The response from [the purchaser] was that its principals had already left for vacation, so they were unavailable. Accordingly, there was no mutual agreement to extend the closing time, and [the purchaser's] failure to attend the closing at 10 AM on September 1, 2011 was in breach of the Agreement. BLS was entitled to retain the deposit as liquidated damages under §19 of the Agreement."