How Breaking a Buyout Deal Will Get You Sued
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After a developer backed out from a $625K deal to buy out the tenants of a rent-stabilized apartment in the Upper East Side in New York, he was sued by the tenants for reneging on an agreement to pay them the agreed sum for moving out of the building. (Related Topics: tenant buyout attorney)
Leo Pustilnikov said the market conditions had changed and now $400K was the new price. The tenants who have lived in the property since 1979 were offered a $625,000 payout to vacate the building by early June this year, a deal that both sides agreed to at the beginning of 2018, according to court documents. However, Leo Pustilnikov, an LA developer and owner of BH Karka LLC, bought 12 of 24 apartments in the building last year from Simon Baron Development for $10 million and decided to lower the initial offer from $625,000 to $400K.
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The payment was due on April 18, but by May 7th, Pustlinikov was out of the deal, stating that the payment was overly generous if the existing market conditions are taken into account. Furthermore, he declared the agreement “null and void”. Parallel to this, his attorney tried to negotiate the buyout by lowering the price of the buyout to $400,000, a figure the tenants refused to accept.
Although the tenants said they were still ready to move out by the agreed date on June 1, they would only do so if the original terms of the agreement were met. The tenants’ lawyer described the case as a clear instance of a developer breaching a contract because even if he thinks he overpaid, that is not a reason to renege on an agreement.
Apartments on that address are listed for between $1.5 million and $9.5 million, according to StreetEasy, and with those figures in mind, it’s quite obvious why the tenants would decide to sue Mr. Pustlinikov. The major take away from this case is the fact that breaking an agreement of this nature will most likely have messy consequences.
As a landlord, you might have the money to deal with a lawsuit in a successful way; but as a tenant, breaking an agreement can bring you many years of debt and pain. So, make sure that you’re making an informed decision before signing any kind of buyout agreement from your landlord. Get professional advice from a tenant buyout attorney and beware the amount of money you’ll be negotiating. Remember that you’ll have to pay taxes for whatever amount of money you receive and you’ll need to have enough money after that to rent another property.
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