You purchase a piece of real property and low and behold, the seller leaves a bunch of his junk behind. You have to spend a lot of money to remove the junk. Do you have a cause of action for breach of contract? How about trespass? This is the situation that occurred in the Second Department’s decision in Novelty Crystal Corp. v PSA Institutional Partners, L.P., 2008 NY Slip Op 00242 decided on January 15th.
The parties in that case agreed that the premises “will be delivered vacant and clean, free of all personalty, tenancies and occupancies.” Despite this language in the contract, the seller failed to remove from the premises prior to closing several storage bins, containers, and other personal property. The purchaser did not raise the issue at closing, and thereafter spent approximately $17,000 to remove the items left by the seller. The purchaser later commenced an action to recover damages for breach of contract and trespass. The Second Department held that the purchaser could not recover for either breach of contract or trespass.
The Court applied the general rule that the obligations and provisions of a contract for the sale of land are merged in the deed and, as a result, are extinguished upon the closing of title. The Court stated that this rule does not apply where there is a clear intent that a particular provision of the contract of sale shall survive the delivery of the deed, or where there exists a collateral undertaking. However, the Court found that neither of these circumstances was present in the case before it.
The Court held that delivery of premises vacant and clean is one aspect of delivering possession of the premises, which can never be collateral to the transfer of title stating:
The right to exclude others, as well as their property is one of the most essential sticks in the bundle of rights that are commonly characterized as property. Because possession of the premises thus goes to the essence of the transaction, the obligation to deliver the premises vacant and clean cannot be collateral to the transfer of title.
In addition, the Court found there was no clear intent that the “vacant and clean” provision should survive the delivery of the deed. In this regard, the Court noted these other provisions of the contract:
The contract provided that “upon closing” the purchaser would “accept the premises as is’, where is’ and with all of its faults”;
In addition, the contract provided: “Purchaser, upon closing, shall be deemed to have waived, relinquished and released Seller . . . from and against any and all claims, demands, causes of action (including causes of action in tort) . . . which Purchaser might have asserted or alleged against Seller . . . arising out of any . . . physical or environmental conditions . . . and any and all other acts, omissions, events, circumstances or matters regarding the premises”;
Next, the contract provided that: “[t]he acceptance of the Deed shall be deemed to be full performance of, and discharge of, every agreement and obligation on Seller’s part to be performed under this Contract, except for those which this Contract specifically provides shall survive the Closing”;
Finally, the contract provided that: “[t]he parties each agree to do such other and further acts and things, and to execute and deliver such instruments and documents . . . and which may be reasonably requested from time to time, whether at or after the Closing, in furtherance of the purposes of this Contract” and that this provision “shall survive the closing.”
The Court stated that the first three of these clauses were susceptible of no interpretation other than that any such claims, whether in tort or contract, were barred. And the fourth provision did not lead to a different conclusion.
With respect to the plaintiff’s trespass cause of action, the Court stated that the trespass cause of action was nothing more than a contract claim pleaded as a tort, and thus, it could not survive as well.
The Court also enunciated the following policy considerations:
Our conclusion that the complaint must be dismissed follows additionally from concern about the deleterious effect on transactional real estate practice that would ensue from reaching a contrary result. The provisions of the contract of sale that are in issue today are not uncommon; they, or similar terms, are found in virtually every contract for the conveyance of real property, including the thousands of residential real estate contracts that close each year in this State. These provisions are designed to ensure that all issues related to the conveyance are resolved prior to the tender of the purchase price and the delivery of the deed at the closing so that the parties may go their separate ways thereafter without further dispute (see Powell on Real Property § 81.05).
If a claim related to the vacancy of the premises is collateral and, therefore, not necessarily resolved at the closing, then so are other claims related to possession, including claims concerning the condition of the premises. “As is” clauses would be meaningless, and the closing of title would be little more than a ceremonial occasion on which documents are executed but there is little, if any, impact on the parties’ respective obligations to one another, since every seller would remain subject to suit until the six-year statute of limitations applicable to contract claims (see CPLR 213) had run.
So, the bottom line is that if you purchase real property, speak up at closing if the seller leaves junk on the premises, or be prepared with plenty of big, black, heavy duty, garbage bags.