Rushmore , Extell NY TIMES WOW

This will be thrown out in court if the judge determines that is was, in fact, a clerical error. End of story.

perhaps... perhaps not.

You should check your contract law John

ruh row

I'm not a lawyer, but I think the error has to be material. If simple typing errors made by secrataries would allow contractes to be voided, you would have thousands of contracts being nulled every single day.

Truth is we don't know. but oh to be a fly on the wall in the office of Extel when they get those calls. and they will get them. Nobody wants to close on an underwater property.

You mean "immaterial'? Or did you make that typo just to make a point?

yes, I mean immaterial. I'm a horrible typer. Good thing I don't write up condo contracts!

Great for these buyers if they can get out.... but, you know, morally, I have to say, a deal is a deal.

You made a contract to buy. If the other side does their part, your mistake is your mistake.

If you had made money, you'd complain if they cancelled the contract. Actually, Trump did something like that in Chicago and people sued and freaked out (of course, turns out he was the idiot).

But these people made contracts to buy, and they should have known the risks, and they should live with their (stupid) decisions.

Lawsuits everywhere..

http://therealdeal.com/newyork/articles/new-condos-cut-corners

Well, when you can't pass on your hot potato mistake to the next guy, you start crying...

In a bubble, nobody care.... not, the ugly side of RE suddenly matters a whole lot.

Great for these buyers if they can get out.... but, you know, morally, I have to say, a deal is a deal.

Now who would take delivery on a car that was 10k over priced(whoops!) if the contract said must be available by sept 1st and the dealer goofed and it was now oct 1st. Most of us would ask for our money back and thank our lucky stars!

I've heard the sales office has repeatedly overstated % sold to buyers, along with other numerous mis-statements. They were telling people they were 65% sold in January, now they are 60% sold? Maybe if a lot have walked away, but they are also saying only one has walked. So I don't think these contracts would hold on moral grounds either...

if these buyers get their deposits back, imagine the effect of the re market.........look out below.

Yo, dudes, I am sooo buying that 4-bedroom with terrace for 2 million now. Yep.

Was the date only in one place -- if it is in two places -- and they differ -- than an clerical error is likely.

i think the resumes must be flying at Stroock and Stroock.

This article is pretty biased towards the developer. Just look at the title. Why isn't it "Fine print to the rescue" or "A contract is a contract". A lot of buyers are in a tough position these days, all have lost a significant amount of their assets, many have lost jobs. Developers have done no favors for these people, and have enforced very onerous plans that clearly favor them in every respect. Are we supposed to feel bad that they are losing some of their profits after years of making millions of dollars? Buyers are just fighting to keep their hard earned money.

For once a contract favors the buyers and they shouldn't get that right?

Buyers should have been more careful.. and now, have a sense of dignity..
So let me get it straight, first you screw up and then you cheat.. great human beings.. great DNA that Darwin would have been happy to excise from the healthier tissue of mankind

'great DNA that Darwin would have been happy to excise from the healthier tissue of mankind'

i think that the buyers here were not judicious in their research and therefore overpaid. However, holding a counterparty to the letter of the law -- or the contract --is standard business procedure. Please name one developer that would let the buyer off the hook if the tables were turned. They would not only take advantage of the situation, they would dine off the story for years.

developers just file for bankruptcy or exercise clauses that allow them to return deposits if things don't go right. funny that one should be discussing ethics and real estate development and finding so conclusively against the purchasers. the developer has no obligation to develop a property in such a manner that is not ulcer-inducing for those in contract, so i have little sympathy for the developer when the contract holders find a way out of a horrendous situation.

I'm sorry Euro, I don't quite get whose DNA you are referring to or who you think is cheating. Is it the sales office that lied about the property, the brokers who didn't tell their clients about the complaint in hopes of still getting their commission, or the developer who is attempting to circumvent the contract that THEY wrote?

I'm not sure I understand either side. There's a contract between them that governs.
So like the rentals at 1 Brooklyn Bridge Park, that was allowed in the contract.
The possibilities that the market would decline, that is within the realm of possibilities and both sides have a contract that they still have to live with. There's some optionality on both sides. Buyer can walk away and lose the deposit. Developer can stall within the bounds of the timelines in the contract. etc.

livver, here due to an error on the part of the contract drafters the buyers may be able to walk and keep the depositss.

Amazing seems apx 10% of the units are known to be in litigation. One must assume that some buyers have forfeited their deposits. Rushmore has a few dings. Seems bad form though if the lawsuit is nothing more than an attempt to lower the negotiated price and not void the contract.

Riversider: Per your posts this morning, bad form is the young guns at Bear and FIG, etc, who juiced the CDO and CDS markets wouldn't you say?

The high end buyers here might want to simply adjust the price but I'm sure the mid range buyers are feeling the squeeze and desperately need to void the contract and walk. Could you give your thoughts on the possibility of the contracts being voided and the effect that would have on the NYC real estate market as a whole?

Article in Post now too

http://www.nypost.com/seven/07282009/business/wrong_number_181722.htm

one less law firm if theyre on the hook

700 lawyer firms don't go out of business for a single potential malpractice claim that will be covered in part at least by malpractice insurance (despite what the Post article says).

http://www.nypost.com/seven/07282009/business/wrong_number_181722.htm

"The Rushmore has 289 units and is 40 percent to 60 percent sold, according to various estimates"

That's a what I like: cold, hard facts.

just the factz Ma'm. just the factz....

YO YO YOU Aboutready!

hey welcome back streeteasyaddict, how goeth the lawsuit?

you tell me 67:

Rushless Buyers! This is the Carlyle Group calling!

w67thstreet said:
"1) I took your 10% deposit and shorted a bunch of REITS, Lehman, Bear in early 2008 as a hedge and so I am completely "in the money" on this deal;
2) I believe the recovery will be V shaped so what incentive do I have to cut you losers a deal;
3) I have over 400 lawsuits pending, including my ex-wife, so the marginal cost to defend against yours is $0;
4) Do you not think a judge will see right thru your "buyer's remorse" and negate the whole contract? At the most we'll have to pay a fine and "cure" some issues;
5) Ever hear of "pissed" off? B/f your BS thread I would have let you walk away from the deposit and maybe "cut" you a slight deal on the newer units, but I'm getting deal fatigue, and you can rotate on a sharp chopstick on your tushy;
6) I have a cold and have to relax at home, so BRING it! You stupid market timing idiots!
7) If it's your home, close and life in peace and prosperity."

Ahh. Come on, give me some tongue. Easy to anger, easy to forgive.

So I assume the lawsuit goeth.

The high end buyers here might want to simply adjust the price but I'm sure the mid range buyers are feeling the squeeze and desperately need to void the contract and walk. Could you give your thoughts on the possibility of the contracts being voided and the effect that would have on the NYC real estate market as a whole?

Sales in one building are just that. But lawyers on both sides will take note of any results..In my humble non lawyer opinion.

"700 lawyer firms don't go out of business for a single potential malpractice claim that will be covered in part at least by malpractice insurance (despite what the Post article says)."

They might if they are already scrambling for work, laying off people and cutting salaries. Firms have gone under for less egregious problems...

malthus, i have to agree. if they are like most firms, they have roughly 200-250 partners. dividing liability among those equals a fairly significant hit. few firms have coverage that extensive. and going forward obtaining E&O coverage would be nearly impossible. few partners would feel comfortable with such a firm, and the best would certainly leave at the earliest possibility. there are many firms looking, even now, to pick up top-notch groups from other law firms.

"Firms have gone under for less egregious problems...

Yes, ask the lawyers that worked for Marc Dreier. He simply took a meeting in a conference room that wasn't in his own building and Poof... 250 lawyers are out of work.

AR: Exactly. The big swingers will hit the road on signs of higher premiums, damaged rep and lower profits. The calls are probably coming in already.

I seem to recall for Brobeck it was simply being overleveraged. Good thing the economy has bottomed and all those debt issues are behind us.

I'll play devils advocate here..any lawyers please chime in
The attorney representing buyers will probably have to prove materiality and realiance
which I think one would argue is probably lacking.

I would be surprised if this oversight could result in a law firm going out of business. I have to believe errors like this occur all the time. If Extell's side was truly worried they would settle or allow for refund of deposits.

Of course I'm interested in the outcome like everyone else. Makes for interesting law.

some interesting discussion on the legal merits here

http://abovethelaw.com/2009/07/a_very_expensive_typo.php?show=comments#comments

some interesting discussion on the legal merits here

what legal merits?
I see a discussion of what law firm did the work, the number of buyers contesting, and the
number of lawyers involved. Where does it discuss the probability of outcome or past precedents?

Anyone else?

Anyone know what they did with this years offers for the incoming class? I think that's a pretty strong indication of what financial position the firm is in.

It means they're not growing this year. who is?

riversider, some of the firms gave greater indications of distress than others. but they may just be more honest.

and the comments to the abovethelaw entry does have some discussion of the legal merits of both side's positions. much of it wrong.

aboutready, are you a lawyer? Please let us know the legal merits of either side. Much of it is wrong but some is right.

Nothing said so far impresses me in the case
Still waiting for someone to cite something similar that can be used as precedent.
I have to think where this hurts most is that it creates uncertainty to existing buyers and potential buyers and just hurts the image of the project. There is the possibility that buyers on the fence of walking might just pile on and it could be a while before this gets settled one way or the other.

my husband's an attorney. but if you read the commentary, those who claim that the contract was by and large a unilateral act by the sponsor are correct. the sponsor has the burden of proving that the buyers knew or should have known the error. but i am not an attorney, and this is in no way legal advice.

should be one hell of a malpractice suit if the buyers win.

contract was by and large a unilateral act by the sponsor are correct. the sponsor has the burden of proving that the buyers knew or should have known the error.

good points...

The plan for the Rushmore was prepared by Stroock & Stroock & Lavan, a firm with 750 lawyers [FN1], and reviewed by the development team at Extell, but no one caught the mistake

Extell reviewed the document. I would think this helps Stroock.

http://www.crainsnewyork.com/article/20090726/FREE/307269971#

so does this put 10% plus of the units out of play? With Extell unable to keep the deposit or resell the units. This might be more about chess than legality.

http://www.abajournal.com/news/somebody_goofed_condo_buyers_cite_single-digit_error_in_legal_document/

The language was based on a state law requiring an operating budget for the first year of a new condo, the story says. If a closing does not occur in that first year, developers must offer a new budget and a chance to rescind the contract. But the plan cited the first day of the budget year rather than the last.

One of the Rushmore’s sponsors, the Extell Development Co., claims the date discrepancy was a mere scrivener’s error, and the date should be interpreted to reflect the state requirement, the story says.

O

http://en.wikipedia.org/wiki/Clerical_error

scrivener's error has been cited in many appeals cases when the appellate court reverses the trial court's decision. In Ortiz v. State of Florida, 600 So. 2d 530 (Fla. App. 3 DCA 1992), Ortiz had been convicted of possession of less than 20 grams of marijuana, a misdemeanor as per 893.13(1)(g) Fla. Stat. (1989). However, Ortiz was adjudicated guilty of a felony for the count of marijuana possession. The appellate court held that "we must remand the case to the trial court to correct a scrivener's error." Thus, the judgment of the lower court was affirmed in part (upheld judgment of guilt), reversed in part (overturned felony adjudication), and remanded back down to the court of original jurisdiction.

http://www.businessdictionary.com/definition/doctrine-of-scrivener-s-error.html

doctrine of scrivener's error
Definition

Legal principle that a map-drafting or typographical error in a written contract may be corrected by oral evidence if the evidence is clear, convincing, and precise. If such correction (called scrivener's amendment) affects property rights then it must be approved by those affected by it.

A.R.
What's the husband's view of this as a typo?

From abovethelaw:

"You can't claim mutual mistake as to a term written into the final contract. This isn't a case of two ships called the Peerless, it's a case of one party trying to enforce the contract as written and the other one trying to get out if it. IF the 2008 term is so laughable that the buyers should have known it was a typo, then the builder has a case. If there's any explanation for it that passes the laugh test, though, the builder is screwed.

Likewise, the guy in the article talking about "scrivener's error" is wrong. If the contract said, "Residents shell not permit visiting Bostonians to shart in the Common Areas," the courts will read "shell" as "shall" because otherwise the provision is incoherent. But as long as it is at all reasonable to read "2008" as "2008," the court will construe the contract against the drafter/builder."

"What evidence can you offer? It can't be any statement by the builder's people -- the contract almost certainly has some clause to the effect that the contract language controls and any contrary oral statement is not binding. I know every 5-page boilerplate apartment lease I've ever signed has had something to that effect, this 730-page monstrosity must as well. Once you have K language saying, in essence, "our salespeople are full of crap and nothing they say is binding," you can't use their statements as notice of a mistake. Unless the buyers were in the room at Stttrook, how else would they know? All you have is constructive notice, which would be that the 2008 term is so crazy that no reasonable buyer would believe the seller was really offering it. Look at the actual facts in cases where unilateral mistake got someone off the hook: it's usually something like 5 bids within 10% of each other, and a 6th 40% lower than all the others. Courts are very, very reluctant to relieve contracting parties of their mistakes. The good news for the builder is that Strook is probably well-insured.

riversider, it doesn't PRESENT as a typo. it's not like a contract said one party will pay $10,000,000 instead of $1,000,000 and both parties knew the truth. unless they can prove that the buyers ought to have known that the date was different, they appear to have a hard road ahead. not to say they might not win, the law and the courts can be quite fickle in interpretation. the hubby's first response was unless there's something big that isn't currently known, their goose is cooked. of course i asked him right after he got home and he hadn't had any food and he probably wasn't really focusing, but contract law is his thing.

i doubt that Stroock is THAT well insured.

riversider, it doesn't PRESENT as a typo

don't know. seems logical to think this will be argued.

yes, it will.

Just my two cents here:

1. Seems to me that if the buyers can make a conincing argument that they thought the date was correct as written and relied on it, then the sponsor is going to have a tough time here. I would, however, take the buyers' atty's quotes in the NYT with a grain of salt. The atty's job is to angle the facts as best he can for his clients.
2. I've dealt with Michel E. at Stroock before and she and her group have a fine reputation. Assuming that she was the partner in charge, sounds like she is going through every transactional atty's nightmare. The reality is that there are mistakes in most docs, no mater who drafts them. Unfortunatly for Stroock, in this case it seems like a big mistake.
3. While the Post loves a sensational story, this is very unlikely to take down a firm like Stroock. First off, this issue would need to be decided/settled against the sponsor. Second, the sponsor would need to make a claim against Stroock. Stroock will argue that this was a factual issue that the sponsor could have picked up just as easily as the sponsor. Finally, if Stroock is ever liable, they would only be liable for up to what this actually costs the sponsor (and this is only if the sponsor is not found to be at fault as well). That number is likely to be far less than the numbers cited by the post (many people would probably settle, etc). Finally, any firm of Stroock's size has a large insurance policy. If they didn't have at least a $50 million policy (albeit with a deductible in the seven figures), I would be pretty surprised. And of course insurance companies usually end up settling.

Best two cents I've heard all day.
Well written jojo10

I agree with one and two. Not so sure about three. On many levels.

A.R. I think the hurdles in #3 are properly laid out.

We'll agree to disagree. I doubt any court would put the burden on the client for catching the fact that their attorneys inserted the wrong date, one which is set out by state law. Why the hell do you hire attorneys? And measurement of harm might be quite tricky here, particularly if large numbers of buyers in contract are able and wish to walk.

Professional liability insurance has become extremely and somewhat prohibitively expensive. I asked the hubby what he thought they might have in coverage, and off the top of his head he said around $25 million. After a large judgment Stroock might very well find themselves with a SIR. Many law firms are having horrendous years. All it takes is some of the top names leaving to create a large degree of distress.

I don't claim to know much about law firm malpractic claims or policies, but here is what I do know:

1. I'm a partner at a firm a bit larger than Stroock and our main policy has a deductible in the low seven figures (as a 1st year this number is pounded into your head as a deterent from screwing up), with a cap in the high eight figures.
2. I don't have any idea what Stroock policy limit is but I can say that there are about 10 other firms from our size to a bit smaller than Stroock that have the same insurance that my firm has (the insurance company is under common ownership). I will say that I doubt that we are much different than other firms here.
3. The one time I was involved in a malpractice claim, our firm was defending one of the other firms with the same insurance. The term scortched earth defense comes to mind. I'm no litigator, but if this is a large claim, why wouldn't the insurance company spend real money on defense and drag this out for a while and get the sponsor to settle for a lower number? The insurance company doesn't care about Stroock's relationship with the sponsor. Complete speculation here, but my point is that I don't see anyone writing a check here for a long time. Also, I would be very surprised if Stroock didn't have emails where the client is signing of on the offering plan. Does this mean that Stroock won't be liable? I have no idea but seems like an issue of fact that wont be ruled on quickly.
4. Warning, more complete speculation here: I doubt that the condo/coop practice is a big one for Stroock. I think that Stroock is one of the few large firms in the city to have such a practice. This is generally a business for smaller firms charging much lower rates. My guess is that the practice right now is mainly generating work for the Stroock litigation dept (which could be a considerable amount of work now, although I doubt the sponsor is using Stroock here). Not sure what this means but if the sponsor isn't a large client of the firm, I could see Strock taking an ever harder line here. These types of issues very quickly climb out of the local department and into the offices of senior management that is unlikely to care than the sponsor has been a client/friend of the condo/coop dept for years.

jojo10, the hubby specializes in, among other areas of law, reinsurance disputes. He is local managing partner for a law firm of roughly 1400 attorneys, and is actively involved in obtaining insurance. The insurance company would love to get the sponsor to settle for a lower number, and depending on the merits of the case, may be able to do so, or may not.

I doubt seriously that right now Stroock is that concerned with its relationship with Extell. Stroock taking a hard line has nothing, also, to do with the merits of their case.

Stroock going out of business as a result of this, seems to be the least likely of all scenarios. The chain reaction would look more like a Rube Goldberg device working perfectly...

riversider, i'm not saying it's likely, i'm saying it's possible. you could not possibly know unless you had insider knowledge of prior malpractice claims, current insurance structure, collections, accounts receivable, billing levels and the like. and a knowledge of their partnership dynamics. my husband spent an interesting six months at Myerson & Kuhn, luckily as a legal assistant and not an attorney, and left one week before they dissolved. Stroock wouldn't be my first candidate for large law firm in trouble, i won't mention those that would be on my list, but many firms are not so healthy right now.

and you don't need all the links in the chain, potentially. it might just take the buyers winning their suit against Extell, and Extell filing suit against Stroock. which is certainly within the realm of possibility, and not so hard to imagine.

A.R. I thnk jojo10 painted the picture well here. If I had to guess the big risk here, I would point to a potential default by Extell on their Hypo Loan. I have no idea the terms of the loans or the length of time for the legal process to work here. I assume the case puts those units and deposits in limbo. The dilemna being they can't sell the units or touch the deposits. Commercial financing is still fairly frozen.

riversider, the damages aspect, if it ever gets to that point, will be a nightmare to figure out, which is why it is impossible to estimate the potential effect. your comment only emphasizes that.

stroock, btw, is about half the size (around 350 attorneys) the NYTs reported. i recalled it being a mid to smallish-sized shop, but didn't know if they had joined the expansion frenzy of the past few years.

http://www.stroock.com/sitecontent.cfm?contentID=2

a.r. I think you said it best. we have to agree to disagree.

that's civil.

on a tangent:

so AR spends 30 seconds going to the Stroock web site to discover that the NYT has mis reported the size of the firm by more than 100%!
why should we believe anything that they write if they can't get something like this straight.

Does anyone else find it shocking how long it took for buyers' attorneys to notice the error?

How many buyers specifically asked their attorneys to look for ways out?

There is a failing here on the buyers' attorneys side, IMO. It goes to show how many just breeze through the offering plan to the building specific pieces and ignore much of the boiler plate.

OldWest, so true. I wonder what genius finally noticed it. Sad to say i have little respect for the standard buyer's real estate transactional attorney. I found numerous errors in both of the contracts i had for the two units we bought in NYC. and the attorneys were just nasty when i pointed them out. i felt they were tempted to tell me not to worry my little head over things i couldn't possibly understand, when they'd made the friggin' errors.

http://www.abanet.org/rppt/meetings_cle/2007/spring/Programmaterial/CommunityOutreach/saft.pdf

Old WEst. Not fair. There's a ton of information in the offering plan and a lawyer is paid a few hundred dollars. They look for the warning signs and advise accordingly. The buyer should be looking himself. And this thing about the "typo", this is the end result of enterprising lawyers looking to make money off disgrunted buyers. All offering plans have these errors. If the market was up, nobody would care.

I think the length of time it took might underscore another issue. It may be worng in one place in the documents and right in all of the others, which, if correct, casts this in a different light.

Riversider:If I had to guess the big risk here, I would point to a potential default by Extell on their Hypo Loan. I have no idea the terms of the loans or the length of time for the legal process to work here. I assume the case puts those units and deposits in limbo. The dilemna being they can't sell the units or touch the deposits

Doesn't the risk also include the the real or perceived damage done to future sales of existing stock. 'IF' the buyers prevail here, the prices will come down to reflect new market realities. Plus, would the impingement on the developers cash flow compromise their ability to deliver on their promises regarding this development-- park, land and community development etc. . And, wouldn't the sales staff have an obligation to divulge this lawsuit to potential buyers since it could have material adverse affect on the future of the development? It can't be conducive to a productive sales plan. I would think that potential buyers would either await the outcome or make low offers.

I would think that the real risk to their loan would be that the developers would have to throw out their sales/price projections if sales slow - or cease-as a result of this suit and they are forced to lower prices.

I assume that people who have already moved in do not have recourse here. However if the current buyers' suit prevails, and prices come down, would the current tenants file their own suit? It would be terrible if the only people who lost on the value of their apartments were the ones who acted in good faith on their contracts.

I assume that people who have already moved in do not have recourse here

Maybe not. They might argue the sellers failed to performa duty. It's wide open. I'm just not sure of the probability of outcome.

Riversider: Totally fair. First, I'd bet the average fee is closer to $5,000 for a closing transaction for a buyer's attny. Secondly, if a buyer asks if there is anything that would let them out, the answer should only be one of three:

(a) No - I read every line
(b) I'm not sure but I'm not going to do a line by line reading for you unless I charge you $X more
(c) Maybe - I read every line but it isn't clear

I'm afraid that most lawyers just answer, "no" and never bothered to read it. To be fair, ANY lawyer and ANY buyer could have found this error. Hell, anyone asking, "what is the outside date in my plan?" and the attorney could look it up.

The unfortunate thing is that most of these buyers were charged thousands of dollars by lawyers who did less than an hour or so of work. They just read the key parts and obviously they didn't read those parts very carefully. That this happened en masse doesn't excuse it.

It's impossible to focus and anticipate everything. I've re-read mine a dozen times for differing reasons. And sometimes the language is open to interpretation.

First, I think this will get decided in a "court of equity" rather than a "court of law" and an awful lot will depend on what judge gets the case. (and yes i know we don't have courts of equity here.... officially....)

Secondly, I can see the depositions of each purchaser:
Q"When was the first time you became aware that the date was 2008?"
A"When I heard about this lawsuit"

none of the purchasers even read the thing (above "Does anyone else find it shocking how long it took for buyers' attorneys to notice the error?"), so how many were induced into signing a contract based on something they didn't read?

Thirdly: for anyone who signed a contract after Sept. 1, 2008, how are they going to get out? The date has passed and the ship had sailed: how are they going to credibly argue that they thought the Sponsor was offering them an out unilaterally? (that is, since the date was passed, if it really meant that, the contract would only be binding on the sponsor and not the purchaser.)

I think the judge is going to press like hell for ADR so they don't have to make a precedent setting decision.

Thirdly: for anyone who signed a contract after Sept. 1, 2008, how are they going to get out?

The attorney representing buyers will probably have to prove materiality and realiance
which I think one would argue is probably lacking.

Certainly speaks to reliance. And I'll add how many of these buyers were in regular contact with Sponsor or agent of sponsor asking for an update of first closing?

The suit is a reach on some levels. What can be argued is that the sponsor needed to revise the first year budget and offer purchasers the right to rescind if the new numbers exceeded the original by 25%(which I believe is based on some law according to an old NY TIMES PIECE).

Extell & Stroock will say they don't believe the first year budget will not increase past the 25% threshold.

This looks more and more like a negotiating ploy, holding up the buyers money in hopes of extracting a lower purchase price from Extell. Anyone have a guess how long a judge would take to hear and decide? The key to the ploy is the Extell/Hypo loan.

does the contract call for ADR? if not, i can't see why the plaintiffs' attorneys would agree to it. anyone know the percentage who signed before 09/08? this puppy has been for sale for quite some time, and had large numbers of contracts signed early on.

not sure i agree with your legal conclusion there, r.s., and defendants can argue all sorts of things.

A.R. I'm a layman. This is just my own personal take.

Option Agreement states obligation of Purchaser and Sponsor are contingent upon the Plan being declared efffective.

For the Plan to be effective required the first occupancy to occur on or before 9/1/2008. Note that the Plan was drafted by the Sponsor not by the Purchasers, so if 9/1/2008 was not the intended date it is no one's fault other than the Sponsor. It is not the obligation of the Purchaser to determine Sponsor intent and the 9/1/2008 first occupancy date obligation is a clear condition to the Plan becoming effective. It's also irrelevant how the Purchaser was made aware the the Plan is not effective.

The fact that the Plan was never effective (despite the Sponsor claiming so) gives the Purchasers the right to rescind the Option Agreement and have their deposits refunded. Maybe some want to rescind maybe some don't but it is clearly their right to. Not sure what recourse this leaves folks who already have closed.

Has it been determined that this date exists no where else in the offering -- to prove the scrivener's error? If not, the buyer's position looks rather compelling- at least to a layman. Can't imagine that a buyer wouldn't want to rescind since the market has dropped since they put down deposits. Maybe some want to stay but just want a lower price. Still, if this many apartments fall en masse to true market prices, it will be interesting to see what affect that has on market prices in general.

In what I have read the Sponsor seems to just have said the 9/1/2008 date should have included a one-year cure period (bringing the first occupancy date to 9/1/2009) that wasn't correctly drafted. I haven't seen the Sponsor assert that another section of the Plan contains their alleged first occupancy date of 9/1/2009.

How does this affect financing? Will a bank lend to a purchaser now?

The plan does indicate the first closing date is anticipated and does say no assurance can be given with regards to the accuracy of the projected completion dates set forth...
It is interesting that Extell did chose to cover themselves and amend the offering plan; doing so seems in hindsight to have been a no-brainer.

correction:
The plan does indicate the first closing date is anticipated and does say no assurance can be given with regards to the accuracy of the projected completion dates set forth...
It is interesting that Extell did NOT chose to cover themselves and amend the offering plan; doing so seems in hindsight to have been a no-brainer.

http://www.oag.state.ny.us/bureaus/real_estate_finance/pdfs/part20.pdf

From the A.G. this is in all probability where the offering plan got its language from. Interesting how it says the plan must be amended, but doesn't state a remedy if the plan is not amended. The remedy of allowing buyers to rescind is only if the new budget exceeds the old budget by 25%... Interesting question is did they review the budget but not amend the plan??

Budget for first year of condominium operation (Schedule B). The plan must describe all
projected income and expenses for the first year of condominium operation in Schedule
B.
(1) The budget shall be based upon a specified twelve (12) month period to
commence on the date when it can reasonably be projected that condominium
operations will begin and no sooner than six (6) months after the submission of
the offering plan for filing. When calculating the projection, include sufficient
time to arrange for the closings. If the actual or anticipated date of
commencement of condominium operation is to be delayed more than six (6)
months from the budget year projected in the offering plan, the plan must be
amended to include a revised budget disclosing current projections. If such
amended projections exceed the original projections by twenty-five percent (25%)
or more, the sponsor must offer all purchasers the right to rescind and a reasonable
period of time that is not less than fifteen (15) days after the date of presentation
to exercise the right, whether or not sponsor offers to guarantee the previous
budget projection. Sponsor must return any deposit or downpayment to
purchasers who rescind within a reasonable period of time. Sponsor may not
declare a plan effective where there are any material changes to the budget if these
changes have not been disclosed by a duly filed amendment to the offering plan.

Although....
http://www.oag.state.ny.us/bureaus/real_estate_finance/pdfs/part20.pdf

Sponsor may not
declare a plan effective where there are any material changes to the budget if these
changes have not been disclosed by a duly filed amendment to the offering plan

I'm still not sure the buyers have a case. The last three were more of a brain-dump.
There does not seem to be a remedy for not doing a new budget, only for the budget exceeding 25% of initial projection. Extell will argue scrivner error and the plan is effective as long as the actual budget does not deviate in a material way. I think the Extell has the better position, but really did goof by not revising the budget, which would've been far cheaper than the current legal fees.

"does the contract call for ADR? if not, i can't see why the plaintiffs' attorneys would agree to it."

Contract doesn't have to call for ADR. The judge can send it there any time they want (it's mediation, not arbitration).

"Option Agreement states obligation of Purchaser and Sponsor are contingent upon the Plan being declared efffective.

For the Plan to be effective required the first occupancy to occur on or before 9/1/2008. Note that the Plan was drafted by the Sponsor not by the Purchasers, so if 9/1/2008 was not the intended date it is no one's fault other than the Sponsor. It is not the obligation of the Purchaser to determine Sponsor intent and the 9/1/2008 first occupancy date obligation is a clear condition to the Plan becoming effective. It's also irrelevant how the Purchaser was made aware the the Plan is not effective.

The fact that the Plan was never effective (despite the Sponsor claiming so) gives the Purchasers the right to rescind the Option Agreement and have their deposits refunded. Maybe some want to rescind maybe some don't but it is clearly their right to. Not sure what recourse this leaves folks who already have closed."

Not sure how you come up with this. The Plan WAS declared effective. It's not the "sponsor claiming so", the AG's Office has to accept it, and I'm pretty sure that happened in this case.

If the judge in this case uses an "reasonable man" standards, I think it's tough for the purchasers to prevail. But as I said before, I really think this is going to come down to the judges concept of equity (and Extell better hope the judge has not bought an apartment in Manhattan in the last 4 years).

OTOH, I think this case will settle. Duh, almost all do. I think what will make the difference is how long the judge sets the timetables to be, because the clock is ticking a lot louder for Extell than the purchasers.

As for my personal feelings, while I have no love for Extell, I think the case is total bullshit. None of these buyers relied on that to make their purchase. none of them (and apparently none of their attorneys, either) even bother to notice it when they singed the contracts. It's simply a case of people holding Extell hostage over an obvious typo.

I'm curious about this: assume arguendo Stroock gets what some are predicting: hit with a bill for $50 million. Is there anyone here who thinks that is "justice" for not catching the typo? I hate lawyers just as much as the next guy, but I find that to be just too far to be anywhere near reasonable.

Yep. Extell's position legal position looks stronger(see my prior posts). Buyer's strategy is to frustrate Extell and hope they negotiate the price down.

riversider: the AG doesn't need to list remedy. "Must be amended" is plenty. But I don't think the budget will be the issue.

30yrs: We would need to see the filing for the making the condo plan effective. Remember, the AG relies on information filed by the Sponsor and does not independently verify it e.g. if the Sponsor lists 30 buyers who are outsiders, the AG doesn't actually bother to check if they are related in some way to the Sponsor.

The question really isn't whether this "typo" will give everyone the right of rescission. There is enough doubt that buyers can hold up closings and since a bunch of banded together, the cost of litigation is much cheaper per.

Extell has to make the decision to fight or negotiate. They can offer a blanket % off to buyers and try to divide and minimize the number of purchasers in the suit. I think it depends on the bank. And the insurance company.

And it's not the severity of the error. We've had multi-thousand dollar commas. The error itself may seem minor but it is the repercussions. I think the $50m number is BS but is any multi-million dollar bill "justice" for a typo? Depends. It isn't the typo. It's the repercussions.

Was the Mars crash "justice" for someone screwing up imperial/metric units? Little issues can have big effects. Which is why you pay someone to do it right.

riversider: the AG doesn't need to list remedy.

Disagree. The failure of any docs to spell out a remedy might give the judge leeway. Remedy might be compelling Extell to amend the budget and continue with the 25% rule..