In case of emergency: What happens if disaster strikes your apartment before you move in

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Earlier this week, a five-alarm fire ripped through a new condo under construction in Chelsea. According to StreetEasy, several of the apartments in the building were on the market this summer, ranging from a $2.875 million two-bedroom to a $6.45 million three-bedroom. And according to The Real Deal, the building—named the Dorian—was set to open at the end of 2016.

That got us wondering what happens to condo buyers if the unexpected happens and apartments are damaged or destroyed.

"Most contracts say that the risk of loss is on the seller [or developer]," says REBNY's broker counsel Neil B. Garfinkel of Abrams Garfinkel Margolis Bergson. "The seller can decide to rebuild or continue to build or return the buyer's money and cancel the project, but the risk of loss is usually on the seller."

When you and your lawyer are reading through a contract for a new development, be sure to look for this, Garfinkel recommends. 

"If the fire was serious enough to be a material event that substantially delays the completion, most contracts have language that governs it, and depending on what the terms of that language are, the buyers may be able to request a refund," says Dean Roberts, an attorney with Norris McLaughlin & Marcus (and, full disclosure, a Brick sponsor).

While you won't likely be on the hook for an uninhabitable apartment, a fire like this can surely "be an annoyance to the purchaser and significantly delay the closing and move-in," says Garfinkel.

If the developer does decide to repair the building and the apartment, "they generally have a reasonable amount of time to complete the repairs and proceed to closing," says Ruben Ravago, an attorney with Braverman Greenspun.  What is a "reasonable" amount of time depends on the circumstances, he says. If the issue has to be litigated, factors like the extent of the damage, the availability of materials, weather and even a police investigation can affect it.

But "if they decide not to repair the unit, then the contract is usually deemed canceled and the deposit is ultimately returned to the purchaser," he says. 

The timing of the whole process can vary. Ravago says that "there is sometimes negotiation around the issues of how long the sponsor has to make the decision whether or not to repair," how long the developer has to set the repairs in place and how long the sponsor has to return the buyer's down payment if they choose not to fix it. A fire like the one this week, he says, " would usually not trigger a right for purchasers to immediately demand a refund of their down payments."


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