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A Manhattan condo board, falling balcony panes, and rising costs.
The first time a balcony pane breaks and falls, it’s an unfortunate accident. The second time, it’s a serious problem. But having the same dangerous event occur three times in as many years? That’s a catastrophe. Your board should be doing something to rectify it – and fast. The three Rs – repairs, responsibility, and resolution – should be on the top of your list, or you could be facing even worse problems down the road. And as one condo discovered, when dealing with capital improvement emergencies and their aftermath, a resolution doesn’t always have to involve litigation.
The story begins with a condo at 325 Fifth Avenue: 42 stories of elegant-looking steel and glass. Built in 2006 between 32nd and 33rd Streets near the Empire State Building, the luxury apartment building has pulled in buyers spending as much as $3.9 million. They are presumably drawn to the dramatic black-granite floors and the waterfall in the lobby and also by such amenities as the 10,000-square-foot residents club, which includes a private screening room, a gym, a playroom, and a fireplace lounge.
But the allure of the condo has dampened somewhat in the last few years. The reason: falling glass panels from balconies.
On July 17, 2007, glass from some of the many balconies on the building came crashing to the ground. Dramatic and potentially deadly, the freak accident left no one injured and surprisingly gained little notice after the initial excitement. That’s probably because it happened in the back of the structure, not in the front.
The architect, the Stephen B. Jacobs Group, issued a statement explaining what had happened. Somebody had apparently thrown “a ball from one of the units and it hit a glass panel,” remembers board vice president King Moy, a professional engineer. That initial pane caused a cascading effect as it hit other panels on the way down, showering glass in back of the building.
No litigation was filed against the sponsor, a joint venture of the developers Continental Properties and Douglaston Development. “The insurance company agreed to pay for some of the damage,” says Moy. The Department of Buildings (DOB) gave its “all-clear” after repairs were made.
Third Time’s the Charm
Later that year, it happened again. More panels falling in the back, more talk of a freak accident, more reassurances, then back to business as usual.
But then, on July 1, 2009, the problem got worse: a glass balcony panel slammed onto the sidewalk along Fifth Avenue. “People were running,” Muhammad Ashsaq, proprietor of the souvenir shop next door, told one newspaper. “Two people were hit and they ran into the building. The police came and shut down the whole street.” This time the DOB would come in with metaphorical guns blazing. “I think I heard about it on the news,” remembers Moy. “My first thought was, ‘Oh, crap.’”
The New York City police, fire, and buildings departments all responded. The resident manager wasn’t there when the accident happened, but the managing agent at the time, Arthur Ostafin (now a vice president at Brown Harris Stevens Residential Management), rushed over. The board’s attorney, Jeffrey M. Schwartz, a partner at Wolf Haldenstein Adler Freeman & Herz, recalls collaborating with Ostafin on an e-mail sent to the board that same day, detailing what happened. “There are no reports of injuries at this time,” it read, in part. “Staff secured the open space on the balcony where the missing glass was... The insurance carrier was placed on notice of the incident.”
The board held an emergency meeting at eight the next morning. The developer, holding four of the board’s seven seats, had a representative there. Also attending were Schwartz and Ostafin. By noon, Ostafin was in touch with Tim Lynch, head of the DOB’s forensic engineering unit. The two would remain in daily contact, as everyone struggled to determine what had caused this third accident, who was responsible, and – its corollary – who would pay to get it fixed.
“There was a cease and desist order by the buildings department to vacate the balconies,” remembers Moy, “so we immediately notified every tenant that they could not use their balcony. The contractor and the sponsor immediately proceeded to follow the buildings department directive to install a safety net and a bridge.”
For Whom the Agreement Tolls
In the meantime, the board had notified the insurance company and was keeping the unit-owners informed. Additionally, the board and the sponsor signed a “tolling agreement” (a common legal tool that by mutual consent stops the clock on any statute of limitations for filing a lawsuit, giving both sides an extended opportunity to investigate an issue and review their claims).
Apartment owners, not surprisingly, were upset. “It’s a brand new building,” explains Jennifer Granda, a managing director at Cooper Square, who began managing 325 Fifth at the end of 2010 after Ostafin had moved on in April of that year. “People bought these expensive apartments and suddenly had no balconies to use.”
The board went through months of meetings with specialists including the sponsor’s architect, “who explained the design and helped us with the [ongoing city] inspections,” says Moy. “Eventually, Cooper Square, pretty much took over,” and in December 2009, FS Project Management, a subsidiary of Cooper Square, came aboard. It brought in an outside architect, says Moy, “and submitted plans back and forth between our board and Cooper Square and the buildings department.”
FS’s first step was to remove all the glass balcony-panels, ending the need for the unsightly wrapping and net. To prevent any resident from even accidentally wandering onto the now borderless balcony, the company secured the doors to prevent their opening from the inside. And, as an extra precaution, it had workers on scaffolding physically block the doors on the outside, using two-by-fours.
Now it was time to examine the glass panels, and how they were designed and installed.
“The top of the glass was exposed,” explains Tal Eyal, chief operating officer of Cooper Square Realty and head of FS Project Management. “The top is the weakest point of any glass” – which was probably why there were so many breaks. Eyal brought in engineer Russell H. Davies, then senior project manager of the New York City branch of Simpson Gumpertz & Heger, and now director of façade engineering at SHoP Construction Services.
“He met with me and with the architect, and we spent a bunch of hours trying to find an engineering way to solve it,” Eyal says. “There were quite a lot of requirements we had to comply with, such as wind load, connections” – i.e., where the glass connects to balcony itself – “height requirements, and the [natural] shifting of the building.” Glass, aluminum, and concrete move differently, he explains, when the building shifts with temperature changes. “We started talking with glass manufacturers and railing manufacturers to get input and costs.”
There was also the issue of who was going to pay for all this. Given the previous two incidents of falling balcony glass, shoddy construction seemed a likely culprit.
“It may have been a construction problem,” Schwartz says. “But I don’t think anyone can say with any certainty. I guess you could argue that the construction was defective because they shouldn’t have kept the top of the balcony panels exposed, though that had been approved by the DOB and also approved at other projects. At unit-owners’ meetings, people asked: ‘If the construction was defective, why don’t we go after them?’”
Why indeed? Moy and the other two non-sponsor members had to decide whether to sue. “After extensive discussions with our counsel and Cooper Square, we felt it would be beneficial to present all the facts to the unit-owners in a public meeting, to let them take a role in what we would do,” Moy says. “After 18 months without being able to use their balconies, people were very emotional. Some wanted to go to litigation. Then an offer came from the sponsor and the insurance company. We presented it to the unit-owners. All were in favor of the settlement.”
The two things that tipped the matter, says Schwartz, were “the complexity of what caused the problem, and the fact that both the insurance company and the sponsor were committing significant sums of money.” Those two parties and the unit-owners each put up about a third of the project’s total cost of “close to $3 million.” Granda, the manager, says the unit-owners were assessed $1.25 million over four months, which included a little extra to increase the reserve account.
“At times, you have to take the step of litigation,” Schwartz concludes. “But what was most important here was the safety of everybody in the building and of [the pedestrians] below, so we had to act quickly to get the situation into a safe condition.” Settlement in this case “made the most sense only because there were some difficult [causal] issues and we had an insurance company and a sponsor who expressed willingness to resolve the problem.”
And in the end, there was a bright spot. Says Granda: “We found a small piece of information that really went over big – that owners were able to put in claims with their [own] insurance companies for ‘loss assessments.’ We gave them the engineer’s report, a copy of the capital-assessment letter, and a letter saying they’d paid. Several homeowners were able to recoup their assessment costs.”