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Contract Purchaser Fails to Show Fraud, Loses Down Payment

In a recent decision, a court refused to allow the contract purchaser of a condominium apartment to back out of the deal and recover his down payment, even though he claimed to have been misled about whether the building had a full-time doorman.

The plaintiff entered into a contract to purchase the apartment for $19 million, allegedly relying on the seller’s representation that the building had a full-time doorman.  Subsequently, plaintiff learned that the building used a “virtual doorman” during certain hours.  The defendant seller did not deny this fact, but asserted that plaintiff could have discovered the facts concerning the doorman through the exercise of due diligence. Plaintiff then filed a lawsuit for fraud, seeking to recover his down payment.  Defendant responded that plaintiff was in default for failing to close and should forfeit his $1.9 million contract deposit.

The court sided with the defendant seller.  To plead and prove a claim for fraud, the plaintiff must show a misrepresentation or material issue of fact, which was false and known by defendant to be false, made for the purpose of inducing the other party to rely, justifiable reliance on the misrepresentation by the other party, and resulting injury.  In particular, “the element of justifiable reliance is essential to any fraud claim.”  Here, the contract of sale provided that the seller was not bound by any oral or written statements made by anyone about the premises, other than statements contained in the contract of sale itself.

The court noted that the contract of sale did not contain any provisions about the doorman and that the condominium’s offering plan disclosed that the building sometimes used a virtual doorman.  Accordingly, the court dismissed the complaint and directed that the escrow agent deliver the down payment funds to the seller.  Dille v. Zoelle LLC, Index No. 157435/2022, 2023 N.Y.L.J. LEXIS 155 (Sup. Ct. N.Y. Co. Jan. 11, 2023).