Toll Brothers' Toxic Towers On The Gowanus: Is It A Deal Or No Deal?

COMPLAINT AGAINST TOLL BROTHERS, INC

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Toll Brothers, Inc. Gowanus Development
above photo credit: Toll Brothers


Gowanus Landowner Claims Breach Of Contract Against Toll Brothers, Inc.

This, dear Reader, is the latest in the saga of Brooklyn's highly polluted Gowanus Canal, Toll Brothers and the proposed listing of the canal as an EPA Superfund Site.

Toll Brothers' proposed luxury housing development on the shore of the Gowanus Canal was always a highly risky endeavor. After all, everyone knew how very polluted this once thriving industrial waterway was. And it was no secret that its banks had been contaminated by the former manufactured gas plants, tanneries, paint, and chemical plants which once operated there. It was also commonly known that New York City's antiquated sewer system discharged raw sewage into the canal after a heavy rainfall.

Toll Brothers Inc., the national high-end home builder, knew as well. But in September 2004, Toll Brothers, Inc. entered willingly into a sales contract with Joseph B. Phillips and Citibank, N.A. (as Trustee Of The Trust under the will of David Phillips) to acquire the property at 365-379 Bond Street, which covers an entire city block and abuts the Gowanus Canal. Together with two adjacent properties, Toll Brothers hoped to market and develop the site into condominium units consisting of high and low rise residential buildings. Toll Brothers made a down payment amount of $5.75 million of the set purchase price of $21,500,000 (later the sum was adjusted to $20,636,836). As per the agreement, the actual sale of the property would be contingent on the re-zoning of the site by New York City from manufacturing to residential.

After a Uniform Land Use Review Process (ULURP) set in motion by Toll Brothers, the property was successfully re-zoned by the City of New York in March 2009. According to the agreement between the Seller and the Toll Brothers, the parties could now proceed to close the transaction. However, in April 2009, the Environmental Protection Agency (EPA) announced that it was proposing to include the dangerously toxic Gowanus Canal on its Superfund list.

By May 2009, Toll Brothers, Inc. notified the Seller's council that it had concerns about the EPA's announcement and sought to delay closing on the property to await the outcome of the Agency's designation process. The Seller, however, refused to a consensual delay and scheduled the closing for August 17th, 2009. In response, Toll shot back a letter stating that the company was under no obligation to close the transaction because , as a result of the EPA announcement, a "windfall lien", which arose prior to closing, now encumbers the property and makes it unmarketable. Therefore, Toll refuses to close until the lien is removed. This prompted the Seller to file a suit against Toll Brothers, Inc.

Though Toll Brothers conducted both a Phase I and Phase II environmental study of the property, which confirmed that hazardous substances and petroleum products were formerly stored on the site, the company believed that "the cleanup methods necessary to remediate the Property would be routine practice, not overly burdensome, and could be completed at a reasonable cost and within a reasonable time frame that would not frustrate or interfere with the timely residential development and marketing of the Property as planned and contemplated by the parties."

Toll Brothers now claim that as a result of the Superfund designation, "a monumentally costly and lengthy process has commenced" which would hinder development and which was not foreseeable at the time the parties executed the contract. (It is of course important to note that the EPA has not yet listed the Gowanus Canal as a Superfund site.)

In October 2009, a counterclaim was filed by Toll Brothers, Inc.

Common sense would have dictated that the shores of the Gowanus Canal was no place to build approximately 460 residential units. But what seemed like common sense to most was overlooked by Toll Brothers in their eagerness to make a profit. Their biggest mistake was that they simply chose to ignore the level of toxicity.

One has to wonder about the Toll Brothers' business acumen.

TOLL BROTHERS, INC. COUNTERCLAIM

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