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Lawsuit: Property Sellers Used COVID-19 Pandemic and Passover to Take Advantage of Buyer


— May 7, 2020

A Brooklyn investor is suing two LLCs over allegations they used the COVID-19 pandemic and Passover to allege he defaulted on their real estate deal.


The coronavirus pandemic has tossed a wrench into the plans of many, from vacation plans and graduations to career moves and house moves. It’s even creating headaches in the real estate industry. For example, a lawsuit filed earlier this month claims the sellers of “two properties in Ridgewood and Bushwick took advantage of the coronavirus pandemic and Passover to claim a buyer defaulted on their deal.” According to the lawsuit, Shulem Herman, an investor in Brooklyn, said he entered into a contract with a pair of LLCs in January to purchase “818 Woodward Avenue in Queens and 417 Suydam Street in Brooklyn for a total of $6.1 million.” The LLCs are located at 155 Noble Street in Greenpoint.

COVID-19 map
COVID-19 map; image courtesy of
Martin Sanchez
@martinsanchez via Unsplash, www.unsplash.com

Despite there being no mention “about needing to close the deal by a certain date” in the contract, attorneys for the two LLCs sent Herman’s attorney a ‘time of the essence’ notice back on March 13 “that scheduled the closing for April 13.” This was problematic for Herman because the closing date was smack dab in the middle of Passover, “even though the sellers know Herman was “an observant Orthodox Jew.” Additionally, the notice was sent “on the cusp of the coronavirus pandemic at a time when people were falling ill and both the state and federal governments were establishing guidelines for managing the public health crisis.” On top of that, Herman’s financing wasn’t going to be ready by April 13, according to the suit.

As if those problems weren’t enough, Herman actually fell ill with Covid-19, “something the sellers knew as of March 30,” according to the suit. Then, the closing date ended up getting pushed back to April 20, a move that was “objectively unreasonable given the stay-at-home and social distancing directives that New York residents are required to observe, and the effect that the pandemic has had on businesses, including lenders,” the suit argues.

April 20 came and went and when the deal failed to close, the two LLCs “declared the contract in default and planned to keep Herman’s $457,500 deposit and find another buyer,” according to court documents. However, Herman notified the sellers that he is “still ready, willing, and able to close on the deal.” The suit further states:

“It is unfortunate that defendants are shamefully using the present public health crisis for their own cynical and selfish ends.”

As a result, Herman is suing for breach of contract and is seeking damages in excess of $5 million. He is also requesting the court to “order the sellers to close on the deal with him as soon as reasonably possible.”

Sources:

Sellers used pandemic, Passover to default buyer: lawsuit

“Shameless”: Suit claims lender uses pandemic to rig foreclosure

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