Supreme Court Awards $800,000 Deposit & Attorneys’ Fees to Purchaser

April 3, 2024 – In a 15+ page decision, the Supreme Court, Suffolk County (Hon. Maureen T. Liccione) has awarded a purchaser summary judgment on her claim for a return of her downpayment and attorneys’ fees, in Farrell v. Gardner, Index No. 613551/2022.  The case involved an $8 million contract to purchase a home in Sagaponack, NY, and, more specifically, customary “certificate of occupancy” (CO) and “as is” requirements found in many real estate contracts to sell Hamptons homes.  The home at issue was staged and shown with a finished third floor that included a bedroom and bathroom.  The purchaser paid an $800,000 downpayment on the contract, but the sellers, who had been aware that the third floor was illegal prior entering into the contracts, nonetheless agreed to deliver the premises in “as is” conditions, with a CO covering its improvements.  After the purchaser learned about the illegal third floor rooms, the sellers “gutted” the third floor by demolishing the bedroom and bathroom “and transforming the finished third floor into an enclosed unfinished attic space, all without permits.”  At the time-of-essence closing, the sellers insisted that they fulfilled their obligations under the contract by delivered the altered house and a 37 year old CO issued in 1985, before the illegal third floor conversion into a finished bedroom/bathroom space and before its subsequent gutting.  The purchaser, who appeared at the closing with the funds to complete the contract, refused to accept the property no longer in its “as is” condition, and without the promised CO.

In a thorough legal discussion addressing the interplay between the customary CO and “as is” contract requirements, the Supreme Court found “that: (1) Sellers breached the Contract by failing to deliver a valid and subsisting CO for the Property and could not deliver the Property in ‘as is’ condition at the closing, and (2) that Purchaser was ready, willing, and able to perform on the time of the essence closing date.”  The court agreed with the purchaser that the sellers were contractually required to deliver both a valid CO covering the buildings as they existed at contract and deliver the property in “as is” condition, but they failed to do either, because the 1985 CO was not valid on the day of closing and the property was no longer in its “as is” condition after the Sellers gutted the third floor.   Though the sellers argued “that it was impossible to deliver the house both in ‘as is’ condition and with a valid and subsisting CO,” the court found that this “argument actually underscores Purchaser’s claim that Sellers could not abide by the Contract terms requiring them to deliver the premises ‘as is’ and with a valid CO.”

After dismissing the sellers’ remaining arguments, the Supreme Court found that the purchaser was “entitled to reasonable attorneys’ fees and costs as the Contract authorized the recovery of attorneys’ fees from the unsuccessful party.”


Supreme Court Grants Buyer Specific Performance of Southold Home

December 11, 2023 – The Supreme Court, Suffolk County (Hon. Frank A. Tinari), has granted a plaintiff summary judgment in a specific performance action involving property in Southold, in Alta Real Estate Holdings, LLC v. Our Business, LLCIndex No. 611064/2020.  The action involved a pre-COVID contract of sale, which the defendant/seller refused to complete after the pandemic hit New York.  In the decision, the court rejected the seller’s attempt to avoid liability under the contract on the ground that a particular letter amendment adjourning the closing was intended to limit the seller’s liability to a return of the downpayment, because, under New York law, a “limitation of remedies ‘will not be implied and to be enforceable must be clearly, explicitly and unambiguously expressed in the contract.'”  The court then found that the plaintiff/purchaser proved that it was ready, willing, and financially able to close on the contract, and that it reasonably set a “time of essence” closing, which the seller refused to complete.  Finally, the court awarded the plaintiff its attorney’s fees because the contract included a specific clause entitling the prevailing party to recover its fees.

Corporate Transparency Act Goes into Effect January 1, 2024

Enacted by Congress in 2021, the Corporate Transparency Act (“CTA”) will become effective on January 1, 2024. The purpose of the CTA is to increase transparency by identifying the individuals controlling and owning certain entities to prevent money-laundering, terrorist financing, tax evasion and other illegal activities through the use of anonymous shell companies. The CTA seeks to accomplish this transparency by creating a national registry of beneficial ownership information for owners of most entities created or registered to do business in the United States (“Reporting Companies”). These Reporting Companies will be required to report personal information about the individuals who own and control such entities (“Beneficial Owners”) to the US Department of the Treasury’s Financial Crimes and Enforcement Network (“FinCEN”). Additionally, it will require entities formed after January 1, 2024 to provide personal information regarding both the individual who files the formation documents for the entity as well as the person who directs the filing of the formation documents for the entity (“Company Applicants”). The required information is filed in the form of a Beneficial Ownership Information (“BOI”) report through FinCEN’s Beneficial Ownership Secure System.

A Reporting Company subject to the CTA is any entity that is either (i) created by filing paperwork with a Secretary of State or any similar office under the laws of any U.S. state or Indian Tribe or (ii) a foreign company registered to do business in the United States, unless it falls under one of several exceptions. Entities that are exempt from the CTA’s reporting requirements include, among others, (i) companies employing more than 20 full-time employees and having more than $5 million in annual gross receipts and an operating presence at a physical location within the United States, (ii) charities, (iii) entities that are already subject to significant governmental regulation and (iv) inactive entities that meet certain requirements (which requirements include that the entity must not own any assets). Single-owner entities that are ignored for federal income tax purposes are nonetheless subject to the CTA and must file a BOI report if they meet the definition of a Reporting Company.

The BOI report must include the Reporting Company’s name (and any alternative names), address, state of formation and tax identification number, as well as the full legal names, dates of birth, residential addresses and identification numbers from a state-issued form of identification (as well as a copy of such form of identification) for each Beneficial Owner and Company Applicant. A Beneficial Owner is any individual who exercises substantial control over the Reporting Company or owns or controls at least 25% of the ownership interests of the Reporting Company. Beneficial Owners include trustees and certain beneficiaries and grantors of trusts holding ownership interests in a Reporting Company.

The deadline for Reporting Companies to file a report will depend upon when the entity was created (in the case of domestic Reporting Companies) or registered (in the case of Foreign Reporting Companies). Reports for entities created or registered prior to January 1, 2024 must be filed with FinCEN no later than January 1, 2025, while entities created or registered on or after January 1, 2024 and before January 1, 2025 must file their report no later than 90 days from the date of creation or registration of the entity. Entities created or registered on or after January 1, 2025 must file their report within 30 days of creation or registration of the entity. Any updates or corrections to reported information must be filed with FinCEN no later than 30 days after the change in information or of becoming aware of any incorrect information.

The Reporting Company itself is responsible for filing the BOI report with FinCEN. The Reporting Company must also update and/or correct any of the information reported to FinCEN. At the time of filing the BOI report, the Reporting Company may request a FinCEN Identifier Number. A Beneficial Owner or Company Applicant may also separately obtain their own personal FinCEN Identifier Number through the FinCEN website by providing the required personal information directly to FinCEN rather than to the Reporting Company. They may then provide such FinCEN Identifier Number to the Reporting Company to provide in such entity’s BOI Report in lieu of providing their personal information. The individual would then be responsible for updating and correcting their own information instead of the Reporting Company.

Failing to file a BOI report with FinCEN can result in penalties including fines and imprisonment. For more information regarding the CTA, visit the following links for FinCEN’s Small Entity Compliance Guide and Beneficial Ownership Information:

FinCEN Website Information (external link)

Small Entity Compliance Guide (external link)

It should also be noted that the New York State legislature passed the New York LLC Transparency Act in June 2023, which is presently awaiting Governor Hochul’s review and signature. This law would impose similar requirements on limited liabilities companies formed or registered to do business in New York, and would take effect 365 days after it is signed by the Governor.

This alert is intended for informational purposes regarding a potential reporting requirement and is not intended to constitute legal advice. Please consult with your corporate secretary or legal counsel about this reporting requirement, whether it affects you, and your responsibilities to ensure compliance with the CTA.

Supreme Court Upholds Residential/Golf Course Development Approvals

November 15, 2023 – In a pair of decisions, the Supreme Court, Suffolk County (Hon. Joseph Farneti) has denied the legal challenges brought by neighbors and upheld the decisions of the Huntington Town Zoning Board and Planning Board, in connection with the project known as the Preserve at Indian Hills.  

In the “Article 78” proceeding against the Zoning Board, Justice Farneti issued a 21-page decision that addressed each argument made by the neighbors, as well a the responses from the project sponsors and the Town’s ZBA.  Among other things, Justice Farneti rejected the neighbors’ claims that the ZBA (1) committed procedural violations during its vote, (2)  “usurped” the powers of the Town Board, (3) failed to make proper findings, (4) failed to respond to a request for interpretive relief, (5) improperly limited its scope of review, and (6) failed to comply with the State Environmental Quality Review Act (SEQRA).  Justice Farneti found many of the neighbors’ claims misdirected against the ZBA, when they should have made those claims against an earlier decision made by the Town’s Planning Board. 

In the second proceeding against the Planning Board, Justice Farneti issued a 15-page decision in which he explained the Court’s ultimate finding “that the petition has been brought long after the Planning Board’s decision-making process had concluded and the time to commence any legal challenge had expired.”  Justice Farneti agreed with the project sponsors that, under established New York law, claims “challenging a subdivision approval must be raised in an Article 78 proceeding against the Planning Board commenced no more than 30 days after the Planning Board files its preliminary approval of a proposed project,” but in this case, “instead of bringing a timely Article 78 Petition against the May 18, 2021 approval, the petitioners waited over two years to bring the instant Article 78 proceeding, and they did so challenging only the final subdivision approval.”

EHADP represented the project sponsors in both proceedings.

Supreme Court Upholds Two Village of Westhampton Beach ZBA Decisions

October/November 2023 – In successive decisions, the Supreme Court, Suffolk County has upheld two Dune Road variance determinations made by the Zoning Board of Appeals of the Village of Westhampton Beach. The decisions illustrate the differences that can result in the variance analysis when comparing new construction on vacant parcels with the remodeling of pre-existing homes.

In the first case, Sprotte v. Village of Westhampton Beach ZBA, decided on October 10, 2023, the Honorable Christopher Modelewski upheld the ZBA’s decision to grant variances to allow a small addition to a pre-existing home on a narrow lot. Neighbors had challenged the ZBA’s decision primarily on the ground that it was inconsistent with other ZBA decisions, but Justice Modelewski found that the ZBA rationally distinguished those precedents because they involved “entirely new construction and not the remodeling of existing homes.”

In the second case, Egret Dune Corporation v. ZBA of Village of Westhampton Beach, decided on November 8, 2023, the Honorable George Nolan upheld the ZBA’s decision to deny variances to allow a new house to be built on a narrow, 35-foot-wide lot. As noted by the court, the “ZBA determined that granting the requested variances would negatively impact the character of the neighborhood as it would result in the creation of the narrowest oceanfront building lot in the Village and the construction of a ‘trailer-shaped home approximately 15 feet wide by 90 feet long, which is unprecedented within the oceanfront neighborhood along Dune Road.'” The court found that the ZBA’s decision had a rational basis and was supported by substantial evidence.

Megan Case Joins the Firm

October 16, 2023 – The firm is pleased to welcome Megan E. Case as Associate Attorney with the firm’s litigation practice group.  Megan is a member of the New York and Maryland bars, a 2022 graduate of the University of Maryland School of Law, and a former clerk for the Hon. Lynn Knight of the Circuit Court for Queen Anne’s County, Maryland.

Appellate Division Annuls Town of Riverhead Zoning Board and Planning Board Decisions

June 7, 2023 – The Appellate Division, Second Department has annulled two decisions from the Town of Riverhead, in Andes v. Zoning Board of Appeals of the Town of Riverhead and Andes v. Planning Board of the Town of Riverhead.   

The first decision involved an application of the New York rules governing “nonconforming uses,” specifically with respect to a pre-existing, nonconforming marina that was located in a residential zoning district.  Although the Town’s ZBA had found that the marina was a pre-existing, nonconforming use, the Appellate Division concluded that the owners’ failure to obtain site plan approval for changes to the marina made after 2003 “casts doubt on whether any of the new structures built after 2003 fall within the Reeves’ nonconforming use….”  Consequently, the Appellate Division annulled the ZBA’s decision and remitted the matter back to the ZBA for a new determination.

The second decision involved the Town Planning Board’s decision to subdivide the subject property, specifically regarding the board’s failure to comply with the State Environmental Quality Review Act, commonly known as SEQRA.  The Planning Board had incorrectly classified the application as “Type II,” which would have made it exempt from SEQRA review.  The Appellate Division agreed with the lower court that “there was no rational basis in the record before the Planning Board to support its conlusion that the subject application was a Type II action requiring no environmental review pursuant to SEQRA.

EHADP represented the petitioners in both of these proceedings.    

Lauren Petersen Joins the Firm

March 27, 2023 – The firm is pleased to announce that Lauren K. Petersen has joined the firm as an Associate Attorney.  Lauren previously worked at at a large national law firm’s Manhattan office and will be working within EHADP’s transactional practice group, focusing primarily on commercial and residential real estate. 

Village of Westhampton Beach Holds Ceremonial “First Flush”

March 10, 2023 – The Village of Westhampton Beach celebrated the completion of a years-long, $16 million sewer project with a “first flush” event. The Westhampton Free Library – the first to officially tie into the new system – had the ceremonial honor of the first flush, in front of a crowd that included Village Mayor Maria Moore, Deputy Mayor Ralph Urban, and fellow Trustees Brian Tymann, Steve Frano and Rob Rubio, as well as Suffolk County Executive Steve Bellone, Deputy County Executive Peter Scully, Southampton Town Supervisor Jay Schneiderman, State Assemblyman Fred W. Thiele Jr. and County Legislator Bridget Fleming.  Together, the Village Board of Trustees became determined to build the first new municipal sewer systems in years after learning that it would reduce nitrogen loading of the bay by over 5,000 pounds per year.  The Village received support from Suffolk County, which agreed to allow the Village to integrate its system into the existing County treatment plant at nearby Gabreski Airport, as well as from the State of New York and Town of Southampton, both of which provided substantial grants to enable the multi-million-dollar project to be completed with little or no expected tax impacts on residents. 

EHADP, which has served as Village Attorneys in Westhampton Beach since 2014, acted as legal counsel to the Village during its creation of the new sewer district, as well as the planning, development, and construction of the sewer system.   

Supreme Court Rejects Town’s Attempt to Revive “Truck Beach” Dispute

March 9, 2023 – The Supreme Court, Suffolk County (Hon. Paul J. Baisley, Jr.) has dismissed two actions brought by the Town of East Hampton and Town Trustees and rejected their attempt to revisit the Courts’ prior decision to prohibit vehicles on the private beach formerly known as “Truck Beach,” in Town of East Hampton v. Seaview at Amagansett, Ltd., Index Nos. 621830/2021 & 604939/2022.   

The two new actions (which were consolidated and dismissed in one decision) stemmed from a 2009 dispute that was litigated over 13 years and resulted in a February 3, 2021 Appellate Division decision concluding that the beach at issue was privately owned (not publicly owned by the Town) and prohibiting the Town and Trustees from issuing permits allowing vehicles to drive on the beach.  In a June 30, 2022 decision, the Court found the Town in contempt of the Appellate Division’s decision.   

After the 2009 litigation had concluded, the Town and Trustees each commenced new actions in which they claimed a right to relitigate whether vehicles could still be permitted on the private beach, in spite of the Appellate Division’s prior ruling.  In the March 9, 2023 order, the Supreme Court disagreed and granted the owners’ motions to dismiss, concluding that:  “A review of the pleadings in these matters reveals that the Town and Trustees are in fact attempting to relitigate the very same issues that have been litigated in the 2009 matter for thirteen years.  Under the doctrine of res judicata, the Town and Trustees may not institute a new action in order to circumvent an unfavorable decision it received in a previous matter.”  In a further rebuke of the Town’s conduct, the Supreme Court not only dismissed the actions but enjoined the Town and Trustees from filing any more actions on the same subject “without prior court approval….”  

Esseks, Hefter, Angel, Di Talia & Pasca represented four homeowner associations throughout the 2009 litigation, the contempt proceedings, and in the new actions.