## Facts

- A condominium sponsor sold pre-construction luxury units in a New York City building under purchase agreements requiring total deposits of 25% (10% at signing plus an additional 15% within a specified period).
- The purchasers, sophisticated parties represented by counsel, negotiated the agreements at arm’s length.
- Four penthouse unit contracts were set for closing in October 2001.
- The purchasers did not appear at closing and asserted a right to rescind based on heightened security concerns after the September 11, 2001 terrorist attacks.
- The sponsor served default notices, provided an opportunity to cure, terminated the contracts after no cure, and retained the full 25% deposits under the agreements.
- The purchasers sued for return of the deposits, claiming full forfeiture was an unenforceable penalty.
- The trial court allowed forfeiture of 10% but required a liquidated-damages analysis for the remaining 15%; the sponsor appealed.

## Issues

1. Whether, upon purchaser default without lawful excuse, the sponsor could retain the entire 25% deposit as a matter of law.
2. Whether the additional 15% should be analyzed as a liquidated-damages clause subject to penalty scrutiny rather than as part of a down payment.
3. Whether post–September 11 security concerns supplied a lawful excuse negating forfeiture.

## Decision

- The appellate court reversed the order to the extent appealed from and granted summary judgment to the sponsor.
- The court held the purchasers forfeited the entire 25% deposits as a matter of law upon default and failure to cure.
- The court rejected the trial court’s approach that separated the first 10% from the remaining 15% for penalty review.
- The court found no lawful excuse for nonperformance based on the asserted post–September 11 concerns.

## Legal Principles

- A seller may retain a purchaser’s down payment when the purchaser defaults without lawful excuse, under the rule governing real-estate down-payment forfeiture.
- Down payments are not categorically limited to 10%; a higher deposit may be enforced where it reflects common market practice and is the product of arm’s-length negotiation between sophisticated parties.
- Where the parties’ agreement structures the deposit as a down payment, forfeiture is analyzed under down-payment forfeiture doctrine rather than liquidated-damages/penalty doctrine.
- Absent overreaching or unconscionability, negotiated deposit terms in sophisticated real-estate transactions are enforced according to their terms upon default.

## Conclusion

The court enforced forfeiture of the full 25% deposits for defaulted luxury condominium purchase agreements, treating the entire amount as a negotiated down payment governed by down-payment forfeiture rules rather than as a penalty subject to liquidated-damages scrutiny.


Uzan v. 845 UN Ltd. P'ship, 10 A.D.3d 230 (N.Y. App. Div. 1st Dep't 2004)