USA - NEW YORK Law and Practice Contributed by: Adam S. Walters, Erin C. Borek, Timothy P. Moriarty and Kelly E. Marks, Phillips Lytle LLP
eral historical, environmental, mechanical, and structural information with respect to the prop - erty. There are generally no common representa - tions and warranties driven by the COVID-19 pandemic. One exception is a representation regarding a seller having a loan or other ben - efits through the federal Paycheck Protection Program (or related program) and whether such loan is still outstanding or has been properly for - given and/or discharged. However, as time has passed since the COVID-19 pandemic, this type of representation is only of limited relevance. Remedies and Protections The remedies against a seller that breaches a representation are typically defined in the con - tract, including termination of the purchase agreement, specific performance, and monetary damages for out-of-pocket costs incurred by the purchaser owed to attorneys and third parties engaged to assist with purchaser’s due dili - gence. Sellers typically seek to limit their post- closing liability for representations and warran - ties by negotiating into the contract a “sunset provision” on their survival. The typical “sunset provision” ranges from six months to one year. However, depending on the transaction and relationship of the parties, the “sunset provi - sion” may run significantly longer. In addition, it is not uncommon in a commercial transaction for a seller to limit its liability for a breach of the representations and warranties. Typically, post- closing liability is capped at 1% to 5% of the purchase price. Such limitations on the length and extent of liability allow a seller to distrib - ute closing proceeds and dissolve entities with knowledge of the maximum potential post-clos - ing liability.
The statutory protections that exist in residen - tial transactions also include remedy provisions, such as payment for actual damages if covered by warranty or if the misrepresentations prevent - ed the purchaser from learning the truth before purchasing the real property. It is not customary to utilise representation and warranty insurance in New York. 2.6 Important Areas of Law for Investors There are several areas of law that are important for an investor to consider when purchasing real property in New York. Federal and state tax law is important for an investor to consider to deter - mine the tax consequences of any transaction. In addition, it is important for an investor to have an understanding of New York Business Cor - poration Law, Partnership Law and/or Limited Liability Company Law so that the investor can properly determine which type of entity should be used to acquire title to real property. Finally, to confirm that the property is acceptable for the use contemplated by the investor, it is impor - tant for the investor to have an understanding of federal and state environmental law as well as local zoning and land use rules and regulations. If the real property is residential rental property, it is also important for an investor to have an understanding of New York landlord-tenant laws. 2.7 Soil Pollution or Environmental Contamination As an owner or operator of a real estate asset, the buyer could be held strictly, jointly, and sev - erally liable for preexisting soil pollution or envi - ronmental contamination pursuant to state and federal laws. Therefore, typical allocations of environmental risk in purchase and sale agree - ments are tailored to the intent of the parties, the site conditions, and the actual or potential presence of contaminants of concern.
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