On April 6, 2026, Justice Cohen of the New York County Commercial Division issued a decision in BNP Dev. LLC v. 9 DeKalb Fee Owner LLC, 2026 NY Slip Op. 31382(U), holding that even though a term sheet said it was binding, it was at most just an agreement to negotiate in good faith, explaining:
Fee Owner argues that the Term Sheet is not an enforceable contract. It is axiomatic that a party seeking to recover under a breach of contract theory must prove that a binding agreement was made as to all essential terms. While the Term Sheet says it is “binding,” that is not sufficient by itself to create a complete and binding agreement as to each aspect of the transaction.
Rather, as the Term Sheet makes explicit, the proposed purchase of rental units was contingent on approval of all Brooklyn Tower Project lenders and any other relevant third parties. Plaintiff does not allege that the Brooklyn Tower Project lenders approved the sale. In fact, one of Plaintiff’s main arguments is that Fee Owner did not even seek such approval before negotiations broke down.
Furthermore, contrary to Plaintiff’s argument that the $12.5 million was a down payment on Plaintiff’s offer to purchase the 398 rental units in the Project for $300 million, the Term Sheets states that the $12.5 million payment was an unconditional investment, not a down payment. And while Plaintiff points to the fact that its $12.5 million investment is included as part of the Payment Schedule for the potential future sale of rental units, Plaintiff’s other investments in the JV Entities are also part of that purported Payment Schedule. Plaintiff does not claim that those investments were made in exchange for any promises in the Term Sheet.
Plaintiff also attempts to rely on extrinsic evidence in the form of an earlier, unexecuted letter sent on behalf of the JDS JV. However that unexecuted letter is not referenced in the Term Sheet, nor would it be binding against Fee Owner. The sophisticated parties to the Term Sheet, each represented by counsel, could have drafted the Term Sheet to return Plaintiff’s investment if the prospective sale fell apart, but they did not do so.
At most, Plaintiff has alleged that Fee Owner breached the contract by failing to engage in good faith efforts to consummate the Rental Sale, including the failure to seek approval of the Rental Sale from the Brooklyn Tower Project’s lenders, and failing to provide Plaintiff with its preferred equity. Where, as here, we are called upon to construe a clause expressly providing that a party is to negotiate in good faith, a clear set of guidelines against which to measure a party’s efforts is essential to its enforcement.
Here, the Term Sheet requires that the Managing member will send a request for approval consistent with the financial terms of this agreement to the Brooklyn Tower Project lenders within one business day of receipt of Additional Preferred Equity to initiate the Approval process. According to the Complaint, Fee Owner never even attempted to present the Rental Sale transaction to the Brooklyn Tower Project lenders, including Mezz Lender, for approval within one day of Plaintiff’s $12.5 million payment or at any time thereafter. This allegation is supported by the November 20, 2024 letter from counsel for Silverstein which stated that approval for the purchase and sale was never sought from the Brooklyn Tower Project lenders (much less obtained) at any time – let alone within one business day of October 10, 2023 – nor would all of the lenders have granted such approval.
Plaintiff further alleges that while Fee Owner claimed that it was working on finalizing approvals for the Rental Sale with the Project lenders, it engaged in a secretive transaction with those same lenders to wipe out Plaintiff’s investment in the Project, without ever informing the lenders of the substance of its negotiations with Plaintiff or Plaintiff about the substance of its negotiations with the lenders. Moreover, Plaintiff argues that while still claiming that the negotiation of the Rental Sale was live, Stern ceased negotiations on behalf of Fee Owner and ceased answering requests for information by Plaintiff, reemerging weeks later to inform Plaintiff that all its equity had been wiped out while claiming (purportedly falsely) that the Rental Sale had been presented to the lenders and rejected. These allegations, taken as true for purposes of this motion, raise issues of fact as to whether plaintiff and the Fee Owner reached a binding preliminary contract giving rise to a duty to negotiate in good faith, and, if so, whether the Fee Owner breached it.
Whether Plaintiff will be able to prove any damages against Fee Owner is a question for another day. However, as noted, contrary to Plaintiff’s arguments, such damages would not include return of the $12.5 million investment, but rather would be limited to out-of-pocket costs incurred in the course of good faith partial performance.
(Internal quotations and citations omitted).