Rushmore developer appeals deposits ruling

TRD New York /
Oct.October 27, 2010 04:30 PM

From left: Gary Barnett of Extell Development, Attorney General Andrew Cuomo and the Rushmore
 

Extell Development and Carlyle Realty Partners filed their long-anticipated appeal against Attorney General Andrew Cuomo, asking the New York State Supreme Court to overturn his order to refund $16 million in escrow deposits at the Rushmore condominium.

Extell, the Manhattan-based developer of the Rushmore, and Carlyle, the financial backer and subsidiary of the Carlyle Group, filed the so-called Article 78 proceeding after a federal appeals court rejected their request for an injunction on the deposit refunds and a U.S. District Court judge threw out their case against the AG.

Now, CRP/Extell, the operating name for the Rushmore sponsor group, is arguing that 41 buyers who backed out of their contracts never really cared about the developer missing a first closing deadline for the Rushmore and that the AG should have allowed it to prove that in an open forum.

“The determinations were thus based on a typographical error that was made in the drafting of an extremely long offering plan,” wrote attorney Edward Norman of the firm Boies Schiller, which represents CRP/Extell. “The sponsor did not intend its offering to say what the typo suggested; the purchasers were not aware of the typo when they contracted and they did not intend to secure for themselves a money-back guarantee that if the first closing of title to a unit in the condominium would take place on the projected date of such closing.”

Cuomo ruled in April that CRP/Extell must rescind the contracts of the 41 buyers at the 80 Riverside Boulevard condo, between 63rd and 64th streets. The buyers argued the developer missed a Sept. 1, 2008 deadline to hold a first closing, while CRP/Extell claimed that the true deadline was Sept. 1, 2009. They said in the Article 78 complaint that one of the lawyers drafting the offering plan made a single-digit typographical error, resulting in the wrong date being published.

CRP/Extell notes that none of the purchasers filed complaints about the missed deadline until February 2009, when closing notices began going out, and they were looking for an excuse to get out of their contracts due to the credit crisis that made it nearly impossible to get condo loans and led to declining home values. The developer says it asked for the chance to question the buyers under oath to determine their true motivations.

The AG ruled that whether or not the buyers relied on the deadline is not relevant, but the language of the offering plan is clear. The AG also noted that CRP/Extell did not provide any evidence to back up the contention that the date was a typographical error.

CRP/Extell is asking the court to block the release of the deposits following the federal ruling that rejected the injunction and the dismissal of the federal case. The developer is also requesting an opportunity to change the language in the offering plan and have a full trial over the escrow dispute.

CRP/Extell officials were not immediately available for comment, and nor were the AG’s office or lawyers for the buyers. Stroock Stroock & Lavan, which was named as the escrow agent and was the firm that drafted the offering plan, declined to comment.

 

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