In October 2017, Arte and Carole Moreno, the former owners of the Los Angeles Angels, agreed to buy a penthouse at 520 Park Avenue for $34 million and put down $8.5 million, a 25% deposit. They never closed. Their complaint was noise from a mechanical room next to the apartment. More than seven years after the closing date passed, a federal judge in Manhattan found the noise "not unreasonable," ruled the developers had taken "all reasonable measures," and awarded the Zeckendorfs the full $8.5 million, plus interest and attorney fees (The Real Deal, September 29, 2026).
Headlines rounded it to $9 million. The rule behind the ruling is more than a century old in New York: a buyer who walks away from a signed contract without a lawful excuse usually loses the deposit. Here is how that works in Manhattan, and how buyers protect themselves before they sign.
This article explains general rules and public cases. It is not legal advice. Every contract is different, and your real estate attorney should review yours.
At a glance
- A federal judge awarded the Zeckendorfs the Morenos' $8.5 million deposit on a $34 million penthouse contract, plus interest and attorney fees, after finding the buyers had no valid reason to refuse to close.
- New York's highest court held in Maxton Builders v. Lo Galbo (1986) that a buyer who defaults "without lawful excuse, cannot recover the down payment," and treated the customary 10% deposit as a reasonable measure of damages.
- In luxury new development, deposits of 20% to 25% are common, and a New York appeals court let a sponsor keep a full 25% deposit on Trump World Tower penthouses in 2004.
- Your real protection is in the contract and the timeline: inspections and concerns before you sign, written notices on time, and an attorney who knows when a delay or a change gives you a legal way out.
What Happened in the Moreno Case
The facts, as reported by The Real Deal and Law360:
- The deal. In October 2017 the Morenos signed for penthouse 58 at 520 Park Avenue at $34 million, paying $8.5 million at signing. The Real Deal, citing court filings, reported that the transaction was structured as an option agreement.
- The dispute. The contract committed the developer to take "all reasonable measures" so a mechanical system would not affect the buyers' "quiet enjoyment." Closing was set for January 4, 2019. The Morenos argued the developer's sound test was run with the system switched off, and declined to close.
- The default. A default notice went out in February 2019, and the agreement was cancelled on March 1, 2019.
- The lawsuits. The Zeckendorfs sued in state court in 2022. The Morenos countersued in federal court seeking their $8.5 million back. After a one-day bench trial in October 2025, Judge Lorna G. Schofield of the Southern District of New York ruled for the developers.
The seller's lawyers at Oved & Oved put the result in one line: "a contract is a commitment, not an option, and pretextual disputes to escape binding agreements will not be condoned." The Morenos' lawyer did not comment. The written opinion's legal reasoning had not been published at the time of the reporting, so we are not characterizing which doctrine the court relied on.
The case has an obvious connection to another risk buyers underestimate. We cover it in our guide to noise due diligence before buying a Manhattan apartment.
The Rule: Default Without Excuse, Lose the Deposit
New York law here is old and stable. In Maxton Builders v. Lo Galbo, 68 N.Y.2d 373 (1986), the Court of Appeals held that "a vendee who defaults on a real estate contract without lawful excuse, cannot recover the down payment," a rule it traced back to 1881. The court applied it even though the seller later resold the property at the same price, and it described the traditional 10% down payment as a generally accepted, reasonable amount. Its advice to unhappy buyers was blunt: "the time to say so is at the bargaining table."
Standard Manhattan contracts build the same result in. The New York City Bar's form condominium contract states that if the purchaser defaults, the seller's sole remedy is to keep the deposit as liquidated damages. If the seller defaults, the buyer keeps broader remedies, including suing to force the sale.
Bigger Deposits, Same Rule
Resale co-op and condo contracts in Manhattan typically call for 10% down. New development is different. Brick Underground describes a common structure of 10% at contract and another 10% when the offering plan is declared effective, and CityRealty reports that foreign buyers are often asked for considerably more.
Bigger deposits have held up in court. In Uzan v. 845 UN Limited Partnership (2004), buyers of four Trump World Tower penthouses for about $32 million paid a 25% deposit, about $8 million, then tried to cancel, citing fear of terrorism after September 11. The Appellate Division let the sponsor keep all of it, noting the contract was negotiated at arm's length with lawyers on both sides, and that "a 25% down payment is common usage in the new construction luxury condominium market in New York City."
The Morenos' 25% sat squarely inside that tradition.
How Your Deposit Is Protected While You Wait
On a sponsor sale in New York, your money has real protections even though it is at risk if you default. Under General Business Law section 352-h and the Attorney General's regulations at 13 NYCRR Part 20:
- The deposit remains the purchaser's money held in trust and cannot be commingled with the sponsor's funds before closing.
- It must be held by an escrow agent who is a New York attorney and not the sponsor, deposited within five business days, with written notice to the purchaser within ten business days.
- Interest is generally credited to the purchaser.
- Release of disputed funds requires a closing, a joint written instruction, a final court order or a notice-and-objection process.
- If an offering plan's amended budget rises 25% or more above the original projections, purchasers get a right to rescind.
Compare that with Florida, where state law lets developers use pre-construction deposits above 10% for actual construction costs once building begins, if the contract says so in a conspicuous legend. New York keeps the money in escrow until closing. If you buy in both cities, our Miami vs Manhattan closing cost comparison covers the other differences.
When a Buyer Can Lawfully Walk Away
Buyers do get deposits back when the contract or the law gives them a way out. Common routes include:
- A contingency that fails on time. A mortgage contingency, for example, only protects you if you follow its notice requirements exactly. In Maxton, the buyers lost partly because their written cancellation was not received within the contract's deadline.
- A material change by the sponsor. In a 2012 case involving a $31 million penthouse at the Plaza, an appeals court allowed a buyer's claims for rescission and return of the deposit to proceed, based on alleged material changes to the filed plans without the required notice. That was a ruling that the case could go forward, not a final win.
- Seller default. If the seller cannot deliver what the contract promises, the buyer's remedies are broader than the seller's.
- A properly declared "time of the essence" closing. A closing date written in a contract is usually not strict. To make it strict, a party must send a clear notice setting a reasonable new date. Getting this step wrong can turn the side trying to enforce the deadline into the side in default.
What to Do Before You Sign
- Do the diligence first. Noise, views, light, mechanical rooms, building finances: anything that could make you not want to close should be tested before contract, when walking away costs nothing.
- Negotiate the remedies. If a seller promises to fix something, ask your attorney to define the standard, the testing method and what happens if it is not met. "All reasonable measures" was the phrase the Morenos' case turned on.
- Know your deposit schedule. On new development, know exactly when each tranche is due, who holds it and under what conditions it is released.
- Calendar every deadline. Contingency and notice deadlines run from the contract, and a notice that arrives a day late may not count.
- Think about the ownership structure early. Buyers purchasing through an LLC or trust, and foreign buyers in particular, should settle structure before signing. Our US estate tax guide for foreign buyers explains why.
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FAQ
What happens to my deposit if I back out of a NYC apartment purchase?
If you back out without a lawful reason under the contract, the seller can usually keep the deposit. New York's Court of Appeals held in Maxton Builders v. Lo Galbo (1986) that a buyer who defaults without lawful excuse cannot recover the down payment, and standard New York contract forms make the deposit the seller's remedy for buyer default.
How much is the deposit on a Manhattan apartment?
Resale co-op and condo contracts typically require 10% of the price at signing. New development sponsors often require more, commonly 20% in two installments, and luxury and foreign buyers may be asked for 25% or more.
Can a seller keep a 25% deposit in New York?
Courts have allowed it. In Uzan v. 845 UN Limited Partnership (2004), an appeals court let the sponsor of Trump World Tower keep a 25% deposit on penthouses, calling 25% common in the city's luxury new construction market. In September 2026, a federal court awarded the Zeckendorfs Arte Moreno's $8.5 million deposit, 25% of a $34 million contract.
Who holds my deposit on a new development purchase in New York?
An escrow agent who must be a New York attorney and cannot be the sponsor. The money stays in a trust account that cannot be commingled with the sponsor's funds, interest generally belongs to the purchaser, and release is governed by the Attorney General's regulations.
Why did Arte Moreno lose his deposit?
The Morenos refused to close on a $34 million 520 Park Avenue penthouse over noise from an adjacent mechanical room. After a bench trial, the judge found the noise "not unreasonable" and that the developers had taken "all reasonable measures," and awarded the developers the $8.5 million deposit plus interest and attorney fees.
Raise every concern, and test it, before you sign the contract.
Related insights
Sources: The Real Deal (September 29, 2026; November 19, 2024; October 14, 2022); Law360 (October 2025); Maxton Builders v. Lo Galbo, 68 N.Y.2d 373 (1986); Uzan v. 845 UN Ltd. Partnership (App. Div. 1st Dept. 2004); Plaza PH2001 LLC v. Plaza Residential Owner LP (App. Div. 1st Dept. 2012); N.Y. General Business Law sections 352-e and 352-h; 13 NYCRR 20.3; New York City Bar form condominium contract; Fla. Stat. section 718.202; Brick Underground; CityRealty.
