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ALTHOUGH CONSEQUENTIAL DAMAGES (MORTGAGE PAYMENTS, TAXES, INSURANCE, ETC.) ARE NOT USUALLY AVAILABLE WHEN A BUYER BREACHES A REAL ESTATE PURCHASE AGREEMENT BECAUSE THE SELLER REMAINS IN THE HOUSE AND THOSE COSTS ARE NOT CAUSED BY THE BREACH, THE SAME IS NOT TRUE FOR A COMMERCIAL SELLER WHO DOES NOT RESIDE IN THE HOUSE AND MUST MAKE SIMILAR PAYMENTS (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined consequential damages were available to the commercial developer in this breach of a real estate purchase agreement case. Usually when a buyer breaches a purchase agreement consequential damages are not available because the seller remains in the house and the mortgage and other costs of living there have nothing to do with the breach. However, where, as here, the seller does not live in the house, the expenses association with the maintenance and care of the home after the breach are financial losses:

As a general rule, consequential damages are not available to a seller of residential real estate when the purchaser breaches the contract … . That is because, typically, the seller “retain[s] ownership, use and enjoyment of the premises,” and it cannot be said that the “mortgage interest expenses, repairs or utilities paid postbreach” are proximately caused by the breach … .

Where, however, the seller is a commercial developer, the seller does not live in the home and never intends to do so. Upon the purchaser’s breach, the developer begins to incur costs that reduce the profit margin. Such carrying costs may include, among other things, maintenance and utility costs as well as real property taxes. Whereas the ordinary residential seller, by living in the home after the purchaser’s breach, receives value for the carrying costs until the subsequent sale, the commercial developer does not receive such value. Instead, the carrying costs are nothing but a financial loss. Chrisanntha, Inc. v deBaptiste, 2020 NY Slip Op 06607, Fourth Dept 11-13-20

 

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