For many years, the Attorney General’s regulations governing offering plans required that sponsors include language authorizing the Attorney General to resolve any disputes concerning the sponsor’s retention or return of a contract purchaser’s down payment if the purchase failed to close. This requirement was dropped from the regulations effective in November 2012, as discussed in the March 2013 issue of this Client Advisory, but many offering plans still in effect include the previously required language submitting such disputes to the Attorney General.
Does an administrative decision by the Attorney General resolving a down payment dispute preclude the purchaser from filing a lawsuit in court seeking return of the same down payment? Yes, according to Bevilacqua v. CRP/Extell Parcel I, L.P., 2015 N.Y. App. Div. LEXIS 1744, 2015 N.Y. Slip Op. 01757 (App. Div. 1st Dep’t Mar. 3, 2015). The court held that the administrative proceeding before the Attorney General, which denied the same relief, was “sufficiently judicial” in nature to warrant preclusive effect. This ruling overrules at least one lower-court decision that reached the opposite conclusion, which was discussed in the July 2013 issue of this Client Advisory.
The appellate court also found that “as in related cases involving purchasers seeking rescission and return of their down payments for units in the same condominium, there were no issues that would have been illuminated by an evidentiary hearing or cross examination.” This language leaves it unclear whether, if a court were to find in another case that disputed factual issues did exist that could be the subject of an evidentiary hearing, the result could be different.