David Werner and Jacob Chetrit are seeking to get their non-refundable deposits back using arguments unrelated to the COVID-19 pandemic. One notorious tactic buyers use when a deal goes sideways is to claim sellers failed to provide complete documentation on tenants’ leases, known as estoppel certificates. Many regard this as a specious argument because it is only raised when a deal goes awry.
- Be Smart: Jonathan Mechanic of Fried Frank told TRD that buyers often have legitimate reasons to get a deposit back, and other times they are grasping at straws: “You see challenges sometimes that are successful and sometimes that are not… There’s not a claim, by the way, that a pandemic happened. That’s not an excuse for not performing.”
- Worth Noting: Attorney Jay Neveloff of Kramer Levin noted that to screen out frivolous requests, courts will sometimes require the buyer to post a bond: “Most buyers aren’t prepared to put up a bond on a specious claim. A lot aren’t prepared to put their money where their mouth is. The leverage of a buyer isn’t very strong there.”
1) David Werner entered a contract last month to acquire a 74-building multifamily and retail portfolio from All Year Management, with plans to close the $346 million deal on May 5. The buyer is now claiming that All Year violated the terms of the deal, and is requesting the return of his $15 million deposit. The portfolio consists of 74 buildings throughout Brooklyn, with 611 residential units and 18 retail stores.
2) Jacob Chetrit is trying to stop SL Green from pocketing the $35 million deposit the company says he forfeited when he backed out of buying the Daily News Building. If Chetrit goes to court, he’d have to make a case that SL Green was to blame for the deal’s demise.
3) South Korea’s Mirae Asset Global Investments said that it has terminated a $5.8 billion deal to buy 15 U.S. hotels from China’s Anbang Insurance Group accusing the insurer of breaching contract obligations. Mirae Asset has also invoked its rights for the return of its deposit relating to the failed transaction, Reuters reported. The asset manager said: “Among other things, AnBang had failed to timely disclose and discharge various material encumbrances and liabilities impairing the Hotels and failed to continue the operation of the Hotels in accordance with contractual requirements.”