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Three Magic Words Make The Difference

It’s tough enough if you buy a new condo from a floor plan and then you think the finished apartment isn’t up to snuff.  Usually the sponsor has stuck so many disclaimers into the offering plan that there’s not much you can do. (See, The Way Out: The Flip Side Of Freedom.)

But what if your complaint isn’t just about problems with your apartment, but design and construction defects with the common spaces?  Is there anything you can do? That depends on three magic words, as a few unhappy buyers of new condos recently found out.

Two couples bought penthouses in a new condo on West !9th Street in Chelsea for $8 and $9 million, respectively, expecting to be living in the lap of luxury. Instead they found ongoing water leaks that they said were caused by defective construction of the roof and the drain, inadequate sealing of the trash chute and a bunch of other things. They sued the construction company for a cool million.  But the company said, you got nothing on us because our contract was with the sponsor, not you, so go fish.

Not so fast, word came down from the court just a few weeks ago. Even though the contract was with the sponsor, it specifically says that the condo and the individual owners of the condo units are third party beneficiaries of the deal, which makes sense because they’re the ones who are going to be living there. And since those three magic words – third party beneficiaries – are there, the couples can seek relief from the construction company.

If the contract doesn’t have those magic words, you’re probably out of luck, especially if the sponsor (usually the only other potentially deep pocket) is insolvent.  That’s why the buyers of condos at The Coves on Long Island, were out of luck when they went to sue the engineer for failing to properly design and supervise the construction of the common areas of the development.  The contract between the sponsor and the engineering firm didn’t expressly say it was to benefit the condo unit owners so the company got off the hook

So how do you know what you’re getting into?  It’s not easy. Even condos put up by big time developers with trophy architects can com into the world with problems, which is why I wouldn’t buy into a new condo.  I want to wait till everything has settled so I know if I’m getting the equivalent of a perfectly formed cheese cake or one that cracked in the formation and needs fixing.

It’s up to you to decide. But now at least you know that one of the risks of buying into a new building with construction defects is that you or your board may have an uphill battle in getting the money back to fix them, which means that in the interim owners may be assessed to make necessary repairs –  not the most welcome house warming gift.

For details, see:

  • Kleinberg v. 516 West 19th St., LLC, 2010 NY Slip Op. 31253(U), May 18, 2010, Sup. Ct. N.Y. Co.
  • Coves of Melvilee Home Owners Assn., Inc v. Massapequa Cove, Inc., 2010 NY Slip Op. 30184(U), Jan. 25, 2010, Sup. Ct. Suffolk Co.

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