Vacant ground floor space at 109 Court.
A canceled deal amid New Haven’s torrid real-estate market ended with a dispute over a $50,000 deposit — and landed in court, in a case that raises questions about the due diligence of property buyers and sellers.
Carol Horsford, who filed a lawsuit seeking return of the money, signed a contract in 2019 to purchase a mixed-use building at 109 Court St., on the condition that municipal documents checked out.
After finding out that the building lacked an expected building permit, said Horsford, who runs a local real estate firm, she terminated the contract. She’s now fighting for the return of her $50,000 deposit in court.
On Thursday afternoon, Horsford appeared at a virtual housing court hearing along with Steven Sadler, the principal of the LLC that owns the building. (Sadler also happens to be the CEO of a professional cleaning company known as Performance Environmental Services.)
Horsford originally filed the lawsuit in March 2020 against 109 – 113 Court Street Associates, LLC. She charged the owner with breaches of contract, conversion, negligent misrepresentation, and intentional misrepresentation in the deal.
Superior Court Judge James Abrams began hearing the case on Thursday, as Horsford testified.
On the virtual witness stand, Horsford recounted that she purchased the four-story Crown Street building with the understanding that the ground floor commercial space was undergoing a conversion to two residential units.
“I’m a commercial realtor, and first floor commercial space in New Haven is hard to keep full, especially on that block,” Horsford said. “Sometimes commercial properties stay vacant for years, so it was exciting to know there was a potential for two more residential units in the property.”
Horsford’s lawyer, Scott Jackson, pointed to a line in the initial contract stating that the sale was subject to a “municipal search”: an investigation of tax records, liens, permits, violations, and other documents related to the property.
After the municipal search, Horsford said, she discovered that the city had not yet issued a permit for the ground floor space to be converted to residential units.
Sadler’s attorney, Bernie Pellegrino, cross-examined Horsford. He pointed out that by the time of the sale, the city had issued a permit to “white box” the building’s commercial space — to clear it out and leave it empty.
That permit has nothing to do with residential conversions, Horsford responded.
Pellegrino asked her whether the contract specified the number of units in the building.
After a minute-long pause, Horsford replied, “Not that I see.”
“You’re the owner of Farnam Realty Group, an accomplished real estate firm, true?” he asked Horsford, whose firm manages properties throughout the area and brokers sales.
“I’d like to think so,” Horsford said.
“So you’re not the run-of-the-mill buyer, right? You’re an expert in the field, are you not?” Pellegrino said.
“I would say I can always learn more,” Horsford answered.
Later in her testimony, Pellegrino implied that Horsford’s experience in the field enabled her to assess the status of construction before purchasing the building.
“You’re an experienced realtor with close ties to the city of New Haven, and building records and municipal records are public, aren’t they?” he asked.
Horsford responded that obtaining those permits is “extremely difficult.”
“You’d have to go down to the Building Department, and they may or may not have been able to find anything. It’s not an easy task to get those kinds of documents,” she said.
“You’re buying a building for over a million dollars. You have concerns: you needed to know how many units there were and the validity of the permits…” Pellegrino pressed. “Did you personally do anything independently to confirm these buildings’ permits?”
“I don’t remember,” Horsford said. “I was relying on the due diligence of the agents, and it’s the burden on the seller to provide requested documents.”
Jackson soon returned with a question of his own: “Did you expect your attorney to perform some of these inspections?”
Yes, Horsford responded.
The trial is set to continue with more testimony from other parties at a yet-unannounced date.