My newly constructed apartment has serious defects. What do I do?
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I recently bought a new construction condo, and, now that I've moved in, I'm seeing serious problems with the way the apartment was built. How can I make the developer fix this?
"The first thing I would do is find out if other people in the building are having the same issues," says Jeffrey Rendin, a new partner at the real estate law firm Wagner Berkow who, until recently, supervised enforcement of condo development issues at the New York attorney general's office. "There is power in numbers. If it is an issue that affects more units, it could be indicative of larger issues in the building."
The next pressing task, according to Rendin, is pulling up the condo offering plan to find what are called the notice provisions.
"Oftentimes when it comes to latent or patent defects, the plan spells out a specific time limit for bringing these issues to the attention of the developer," Rendin says.
Depending on how long it's been since the developer started selling apartments in the building, the developer (or, "sponsor") could still control the building's board, as it still owns most of the units. In that case, your band of disaffected apartment buyers would need to meet on your own and retain a lawyer. If the board is resident-controlled, the board could go through its usual lawyer, but Rendin recommends making sure that lawyer is versed in condo and construction defect law, particularly if things progress beyond the initial complaints to actual litigation.
"You want your litigation counsel to be very savvy, very knowledgeable about the Martin Act," the New York securities law governing condo development, "which is very antiquated, and rarely litigated," Rendin says. "Consumers are being done a disservice when they don't have knowledgeable counsel."
Before suing, though, you have some options, and you need to decide a few things first. Any sort of formal action is going to require an engineering or architectural analysis by a professional, so your group and your lawyer will need to figure out what that might cost, and whether it's worth it in light of what it could cost to fix the problems. Also, lawyers cost money, so you'll need to figure out whether the conditions and the timing are such that it makes sense to file a complaint with the attorney general, which could shift much of the burden of fighting to the state. Otherwise, you could end up spending thousands more to have someone show up in court for you.
"Legal action is a business consideration as much as a legal one," Rendin says. "If it's going to cost $200,000 in legal fees to get $100,000 worth of work done, it's probably not worth it. If it's $10 million worth of problems, that's another thing."
The Attorney General's Office has the most leverage when the developer is still midway through selling the new apartments, as regulators there can actually hold up additional sales until problems are addressed. Developers, often under intense time pressure to meet budgets, repay loans, and reward investors, care primarily about selling units, so they take impediments to doing that especially seriously.
The more time has passed, the less luck you'll have with the attorney general, and the more of a potential defense the developer might have in arguing that the issues are due to improper maintenance, rather than the initial construction work. For this reason, you'll want your engineer's report to specifically address the causes of the problems, and what the analysis turns up will further inform what your options are.
If you're considering a lawsuit, another test will be the likelihood of the suit surviving a first motion to dismiss. Rendin explains that New York law favors developers, so it's all too common that aggrieved condo buyers have their lawsuits thrown out just out of the gate.
"If a lawsuit survives a first motion to dismiss, that's usually when settlement talks begin in earnest," he says.
As disheartening as all of this can be, Rendin says that often the threat of a lawsuit or an attorney general complaint can be enough to spur indifferent developers to action.
"They don't want to go to trial, they don't want the legal fees, and they don't want that damage to their reputation," he says. "Generally they want happy purchasers. They don't want you going to the attorney general complaining about construction defects."
The lawyers at Wagner | Berkow have decades of experience representing co-ops, condos, and individual apartment owners and shareholders. To submit a question for this column, click here.. To ask about a legal consultation, send an email or call 646-791-2083.
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