No one likes to get stranded at the altar – whether it’s a marriage or a real-estate transaction. But that’s what happened after a buyer made an offer on an Upper East Side co-op apartment, the owner countered, and the two parties agreed on a price. The buyer gathered financial information and letters of recommendation to present to the co-op board, then hired an attorney to work on the transaction, paying half of the attorney’s fee up front. About 10 days later, the shareholder took the apartment off the market. Can the jilted buyer demand that the seller refund the attorney’s fees for the aborted transaction?
Sorry, replies the Ask Real Estate column in the New York Times. An accepted offer is not a binding agreement. Until the buyer delivers a deposit and a fully executed copy of the contract has been delivered to the buyer or her attorney, either party can walk away for any reason or no reason at all.
The seller is not responsible for any money the buyer has spent up until that point. The buyer has no guarantees but still needs a lawyer to review all the documents and draw up the contract. Attorneys don’t start working until they’re paid a retainer and generally do a bulk of their work before the contract is signed. They read the board minutes, analyze the financial statements and negotiate the contract with the seller’s attorney.
“Lawyers are paid based on their time spent on matters regardless if the deal closes or not,” says Pierre Debbas, a managing partner at the law firm Romer Debbas.
If there’s any balance left on the retainer, then the lawyer should return that money to the buyer. But the seller is under no obligation to reimburse the buyer for the work the buyer’s lawyer did.
All of this is cold comfort to a buyer who laid out a large sum in good faith that the deal would happen. Unfortunately, it is a risk of buying an apartment. The other side of this coin is that if the buyer had uncovered any problems during this period, or decided that she simply no longer wanted the apartment, she too would have been able to walk away from the deal, paying only her own legal fees and nothing more. Real estate can be a cold game.
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