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Rule Against Perpetuities - Closing Date not Specified

The vendee of a condominium unit commenced an Action against the Sponsor seeking a declaratory judgment that its Purchase Agreement was void and that he was entitled to the return of his contract deposit. The Defendant-Sponsor contended that the failure of the Plaintiff to close on the purchase of the unit was a default under the contract entitling it to retain the deposit as liquidated damages.

The Plaintiff contended that since no date was specified for closing, and the closing could therefore take place more than twenty-one years after execution of the Purchase Agreement, the Agreement violated the Rule Against Perpetuities (Estates Powers and Trusts Law Section 9-1.1). However, under the Offering Plan, which was incorporated by reference into the contract, the Sponsor was to schedule a closing date on thirty days' notice, and if construction of the building was not substantially completed or if the first unit closing did not take place by dates specified in the Offering Plan the contract could be rescinded.

The Supreme Court, New York County, found that the parties intended that the sale of the unit take place within a period of less than twenty-one years from the date of the execution of the Purchase Agreement and, applying EPTL Section 9-1.3 ("Rules of construction"), ruled that the Plaintiff was not entitled to the return of its contract deposit. Under Section 9-1.3 (d), "[w]here the duration or vesting of an estate is contingent upon...the occurrence of any specified contingency, it shall be presumed that the creator of such estate intended such contingency to occur, if at all, within twenty-one years from the effective date of the instrument creating such estate". Jeffcock v. MCP So Strategic 56, L.P., 2010 NY Slip Op 32786 decided September 29, 2010, was reported in the New York Law Journal on November 3, 2010.

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This page contains a single entry from the blog posted on February 5, 2011 7:32 PM.

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