Summary
This appellate decision addresses a dispute over the return of a down payment after a real estate purchase contract failed due to financing issues. The Appellate Division, Second Department reversed the lower court's denial of summary judgment, finding that the plaintiff made a genuine effort to secure mortgage financing and acted in good faith under the contract's mortgage contingency clause. Additionally, the court determined that the defendant waived the strict 30-day deadline for obtaining loan approval through his conduct. Consequently, the plaintiff was entitled to recover her down payment.
Topics
Practice areas
Questions Presented
- Whether a purchaser who makes a genuine effort to obtain mortgage financing and acts in good faith is entitled to recover a down payment when the mortgage is not approved through no fault of the purchaser.
- Whether a waiver of the contractual deadline can be inferred from conduct without a written agreement.
Holdings
- A purchaser who exerts a genuine effort to secure mortgage financing and acts in good faith is entitled to recover the down payment if the mortgage is not approved through no fault of the purchaser.
- A waiver of the right to timely performance need not be in writing; it may be inferred solely from a party's conduct.
Key quotations
“Where a contract for the sale of real property contains a mortgage contingency clause, as long as purchasers exert a genuine effort to secure mortgage financing and act in good faith, they are entitled to recover their down payment if the mortgage is not in fact approved through no fault of their own.” (N/A)
“A waiver of the right to timely performance under a contract need not be in writing in order to be valid and enforceable; such a waiver may be inferred solely from a party's conduct.” (N/A)
Factual background
On October 26, 2020 the plaintiff contracted with the defendant to buy a Brooklyn property for about $1.2 million, providing a down payment held in escrow. The contract contained a mortgage‑contingency clause requiring a lender commitment within 30 days. The plaintiff made good‑faith efforts to obtain financing, receiving conditional approvals that were later reduced, and ultimately could not secure the required loan amount. The defendant refused to reduce the purchase price and later deemed the plaintiff in default, prompting the plaintiff to sue for return of the down payment.
Procedural history
The plaintiff contracted to purchase real property, tendered a down payment, and sought financing under a mortgage‑contingency clause. After failing to obtain the required loan despite good‑faith efforts, the plaintiff sued for return of the down payment. The trial court denied summary judgment; the appellate division reversed and granted summary judgment.