The Real Deal: $100 mil Typo Case
- Posted on: Apr 9 2010
The Real Deal: Marc Held, Partner, Held & Hines, LLP Quoted Re: $100 mil typo case
AG orders Extell to refund Rushmore buyers
Developer Gary Barnett talks about the Upper West Side building’s future following decision
April 09, 2010 07:00PM By David Jones
alternate textThe Rushmore and Gary Barnett
Extell Development President Gary Barnett conceded defeat after the state attorney general ordered him to release 41 buyers from disputed contracts at the 289-unit Rushmore condominium (see the attorney general’s decision below).
“We’re not happy about this but we never expected many of these people to close at this point,” Barnett told The Real Deal in a telephone interview.
Attorney General Andrew Cuomo ended a 14-month dispute at the Rushmore, located at 80 Riverside Boulevard, after buyers alleged the developer failed to begin closing apartments by a Sept. 1, 2008 deadline.
Extell has argued that the missed deadline was due to a “typo” and that closings at the Rushmore were supposed to commence closing a year later, but the AG states not only that Extell failed to back up the claim, but that the alleged error should not negate the buyer’s claims.
“Sponsor states that the Sept. 1, 2008 date was a ‘scrivenor’s error’ and that the intended date was Sept. 1, 2009,” wrote Lewis Polishook, assistant AG. “Sponsor has offered no evidence that the parties mutually intended a different date. After extensive submissions before this office and careful deliberation, the attorney general has concluded that the alleged error is not chargeable to the purchaser.”
Polishook also noted that Extell failed to present a single document that demonstrates that Sept. 1, 2009 was the intended date.
Lawyers for the buyers argue that the decision backs up their allegations of bad faith and fraud.
“The attorney general’s office determination today proves that my client should have been granted from the onset a right of rescission and return of her money,” said attorney Marc Held, whose client, JPMorgan Chase executive Kelly Coffey filed suit in October 2009 to get a refund of her $1.1 million Rushmore deposit. “The decision also proves that the actions by the defendants are fraudulent and without merit.”
Richard Cohen, who represents 33 buyers that filed complaints, said: “We are extremely pleased that the attorney general has supported and recognized the purchasers’ contractual rights under their purchase agreements and offering plan, by requiring the sponsor to return the purchasers’ down payments, after the sponsor failed to complete the first closing at the Rushmore by Sept. 1, 2008, the date promised in the Offering Plan and in the sponsor’s promotional materials.”
Barnett said the decision would have no impact on the Rushmore’s relationship with its lenders, adding that sales remain strong. Barnett did not have updated figures, but told The Real Deal earlier this year that more than 110 units were closed and another 100 were under contract.
Earlier this week, The Real Deal obtained documents showing that in 2006, Extell did what it has claimed it would never do in connection with its projects. In the offering plan for a condo project called Altair 20, at 15 West 20th Street in Chelsea, Extell said it expected closings would begin by May 1, 2006. The developer stated that it would offer rescission if closings did not take place by April 30, 2006, which was the first day of the project’s anticipated budget year.
In an amendment to the Altair offering plan dated April 26, 2006, Extell updated the budget year and offered buyers a 15-day period to get their deposits back, but never explicitly offered a similar rescission for Rushmore buyers.
As The Real Deal previously reported, Extell later changed the first closing date at the Rushmore to February 2009, and blocked the initial buyers from getting rescission before the AG’s office made them update the plan with new language restoring some of the rights.
Extell yesterday told The Real Deal that it never offered refunds at the Altair because the first closing deadline was twice amended.
“Our first year of operation was amended to commence on Dec. 1, 2006 to Nov. 30, 2007 and then further amended to commence on July 1, 2007 to June 30, 2008,” said Raizy Haas, senior vice president of development, who was the project manager at Altair 20. “Our first closing occurred on June 25, 2007; therefore no rescission was offered.”
Also yesterday, a spokesperson for Stroock & Stroock & Lavan, the law firm and escrow agent for the Rushmore, said the firm would not comment due to ongoing litigation.