The developers of the Rushmore condominium at 80 Riverside Boulevard — a partnership between Extell Development and Carlyle Realty — are refusing to give up the fight for $16 million in security deposits, blocking the return of the money to 41 condo buyers at the West Side building, despite a Second U.S. Circuit Court of Appeals ruling last week, the Wall Street Journal reported. Stroock & Stroock & Lavan, the law firm holding the disputed deposits in an escrow account, isn’t allowing the money to be returned. An attorney for the Rushmore’s developers sent Stroock a letter arguing that there is “no basis at this time” to release the down payments, a standard procedure that allowed the developers to decide if they want to pursue the case further, sources said. The office of Attorney General Andrew Cuomo, however, also sent Stroock a letter, instructing them to release the funds to the buyers. Richard Cohen, an attorney for a group of buyers, said that his clients will continue to pursue the case, which has been closely followed in the industry at a time when many condo buyers have been trying to escape from contracts that committed them to purchases made near the market’s peak. [WSJ]

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Lawyers for Carlyle Realty Partners and Extell Development, the sponsors of the Rushmore condominium on the Upper West Side, said they plan to challenge last week’s order by Attorney General Andrew Cuomo to refund the deposits of 41 buyers, according to a court filing obtained by The Real Deal. In a letter to state Supreme Court Judge Debra James, lawyers for the sponsor, CRP/Extell, said they plan to file a so-called Article 78 that will challenge the AG ruling, and continue to argue that the disputed Sept. 1, 2008 rescission date was a “typographical error,” that should have been excused. “The AG decision concludes that certain purchasers have a right of rescission based on an obvious typographical error in a single digit in the 757-page offering plan for the Rushmore,” said Simpson Thatcher attorney Laura Murphy, who represents the two companies. The letter was in response to a demand by lawyers for Rushmore buyer Kelly Coffey to get documents and other evidence from CRP/Extell. Coffey, a managing director at JPMorgan Chase, is not one of the 41 buyers that complained to the AG, but filed a lawsuit in state Supreme Court seeking a return of her deposit. [more]

The Rushmore and Gary Barnett

Extell Development President Gary Barnett conceded defeat after the state attorney general ordered him to release 41 buyers from disputed contracts at the 289-unit Rushmore condominium (click here to see the attorney general’s decision). “We’re not happy about this but we never expected many of these people to close at this point,” Barnett told The Real Deal in a telephone interview. Attorney General Andrew Cuomo ended a 14-month dispute at the Rushmore, located at 80 Riverside Boulevard, after buyers alleged the developer failed to begin closing apartments by a Sept. 1, 2008 deadline. Extell has argued that the missed deadline was due to a “typo” and that closings at the Rushmore were supposed to commence closing a year later, but the AG states not only that Extell failed to back up the claim, but that the alleged error should not negate the buyer’s claims. [more]

From left: Attorney General Andrew Cuomo, Secretary of Housing and Urban Development Shaun Donovan and the Rushmore

The U.S. Department of Housing and Urban Development has launched an investigation into the Rushmore condominium, amid allegations that the lawyers for the developer, Extell Development, held previously undisclosed meetings with state Attorney General Andrew Cuomo’s office to prevent existing buyers from backing out of their apartment contracts.

HUD officials said that as of May 11, 2009, Extell “voluntarily suspended” the building’s registration under the Interstate Land Sales Full Disclosure Act (ILSA), a federal law that protects consumers in newly constructed condos with more than 99 units. The move would allegedly be a way for the developer to shield itself from ILSA-related claims.

HUD opened the probe after media reports mentioned that 34 buyers filed complaints with the AG’s office. While officials did not disclose why Extell would suspend, documents obtained by The Real Deal show the Rushmore developer was facing an ILSA-based lawsuit prior to the filing. [more]

The sponsors of Extell Development’s Rushmore condominium have quietly begun offering sales discounts of up to 25 percent in a campaign to retain at least some of the 30-plus buyers looking to back out of their contracts, according to multiple sources. A group of at least 34 buyers filed complaints with Attorney General Andrew Cuomo’s office, looking to get out of their contracts. And sources said that representatives of the Carlyle Group, which is Extell’s partner in the Rushmore, at 80 Riverside Boulevard, have contacted individual members of the group regarding discounts. Carlyle officials were not immediately available for comment, but Gary Barnett, Extell’s president, denied that any discounts were being offered.
“It’s not true,” said Barnett, in an e-mailed statement to The Real Deal. “These rumors are being spread by an attorney with an axe to grind.”
Barnett did not elaborate on which attorney he was referring to, or how he knew about any specific claims.Attorney Richard Cohen, who represents the group of 34 Rushmore buyers,
confirmed that one buyer dropped out of the group in recent days and
one other buyer previously left the group. “Our assumption is they were offered a discount,” said  Cohen. “We don’t think they would otherwise leave the group.” [more]

As the real estate market has declined, buyers at the Rushmore, at 80 Riverside Boulevard, have been trying to find ways out of their contracts. Now, buyers and the development’s sponsors, Extell Development and the Carlyle Group, have agreed that there was a mistake in the date given in the project’s offering plan. The plan said that buyers would be able to back out if the first closing did not occur before September 1, 2008, but the year given in the plan should have been 2009. The first closing took place in February of this year. Real estate attorney Richard Cohen has filed an application with the state attorney general’s office asking for deposit refunds for 23 Rushmore buyers. But Extell argues that the mistake in the offering plan was not significant. Cohen said many of the Rushmore buyers don’t actually want to leave the building, but they want to purchase their units at a lower price.