Co-op seller keeps dead buyer’s down payment

By Jovana Rizzo | January 06, 2009 04:09PM

In a recently settled lawsuit, the seller of an Upper East Side cooperative unit got to keep a down payment from a buyer who died before the closing.

Glen Altman was in contract to buy a co-op for $2.3 million at 1150 Park Avenue, between 91st and 92nd streets, and paid a $230,000 down payment. She was approved by the board, but before closing on the unit, she passed away.

Altman’s estate wanted the down payment to be returned, but the Manhattan Supreme Court ruled that the seller could keep the money.

Ira Matetsky, an attorney at the law firm Gafner & Shore, who was not involved with the lawsuit but wrote about it in his firm’s newsletter, said the seller won the suit because there was no provision in the contract stating that if the buyer died, the contract could be broken.

“In some situations, a contract contains a standard provision that if a purchaser should pass away before the closing, the contract is null and void,” Matetsky said. “This case arose, and the contract didn’t say one way or the other.”

Altman, who passed away in 2005 at age 74, was survived by her daughter, Tracy Altman Warner. Warner, a Corcoran Group agent, and her attorney were not immediately available for comment. Altman and her husband, Edwin, who passed away in 2003, ran a wholesale diamond company called M.B. Altman Sons. The lawsuit was settled in October.

According to the lawsuit, the estate argued they were not obligated to go forward with the purchase because the contract called for occupancy by Altman only. However, there was no provision in the contract to cancel the deal.

JoAnn Schwimmer, an associate broker at DJK Residential, said she had never heard of a situation like that before. “It seems immoral,” Schwimmer said of the seller keeping the down payment.

Roberta Axelrod, director of residential sales and rentals at Time Equities, said that in a few of her deals, lawyers have requested that a provision be put into a contract that would cancel the deal if the purchaser passed away.

“None of my purchasers have ever died,” Axelrod said, “but the way it technically works is that unless you put it in the contract that you have the right to cancel it, the estate is bound to [the purchaser’s] obligation.”

If a purchaser buying a condo passed away, the
estate would have to buy the unit if there wasn’t a provision in the
contract canceling it. In the case of a co-op, however, the estate has to be approved
by the board.

The co-op board president at 1150 Park Avenue, Herbert Appel, testified that the estate did not submit an application to go forward with the sale, and if the estate had wanted to purchase the unit, its application would have been considered by the board, although an estate has never bought a unit in the building.

Matetsky the attorney said, however, that typically a co-op board — which has stringent requirements for approval — would not allow an estate to buy a unit as it wouldn’t know who from the estate would move in.

And in a case where an estate is required to go forward with the sale, Time Equities’ Axelrod said, the seller can still decide to cancel the contract and return the money.