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How a Seller Can Retain the Downpayment as Liquidated Damages in New York

Naturally, this article is the flip side of the coin to "What a Property Buyer Must Prove to Recover His Downpayent in New York." And, although standard real estate contracts of sale are often very heavily weighted in the seller's favor, that doesn't necessarily mean that if the sale fails to close that the seller will be entitled to retain the buyer downpayment.

To the contrary, it appears that in most cases the buyer will be able to recover his downpayment because the deals tend to fall apart over conditions precedent to the contract of sale, such as the buyer's ability to secure adequate financing, or the seller's ability to obtain the co-op board's consent to the buyers joining the cooperative. (And in some cases, such as in Marzullo v. Beekman Campanille, Inc., the issue revolved around getting approval for the incoming buyers to have pets. For additional information on this topic, please see "No Tortious Interference Without Breach of Contract, Says NY Court").

Ultimately, in order for the seller to be entitled to keep the downpayment as liquidated damages for the buyer's failure to close, (and unless the buyer makes clear beforehand that he either will not, or cannot, fulfill his end of the contract - which is legalese is called "anticipatory breach of contract") the seller will be required to demonstrate that "he had, and was ready, willing and able to deliver, marketable title to the property on the 'time is of the essence' date," and that he fulfilled his end of the bargain.