It happens all the time in New York City. Someone buys an apartment relying, without further investigation, on statements made by a sales agent – and then learns, too late, that the statements are incorrect.
According to a news report, it happened last year to a buyer who placed a $1 million down payment on a $10.5 million apartment under construction in Chelsea. The selling agent told her that the ceilings would be “just shy of 10 feet tall,” high enough to accommodate her extensive art collection. But when she later reviewed the offering plan and measured the finished apartment, she found that the ceilings were not the anticipated height. She has had to sue to recover her down payment.
A similar case unfolded recently in the East Village: a sales agent marketing a co-op gave a floor plan to the purchasers showing that the unit was 1,966 square feet. The purchasers closed and paid the sponsor $2.1 million for the apartment – only to discover after moving in that the unit was actually only 1,495 square feet, they said. They sued both the agent and the sponsor, claiming that, by virtue of the floor plan, they had been given a warranty as to the size of the apartment, or that the floor plan constituted fraud or negligent misrepresentation.
However, the offering plan stated: “Any floor plan or sketch shown to a prospective purchaser is only an approximation of the dimensions and layout of a typical apartment. The original layout of an apartment may have been altered. All apartments and terraces appurtenant thereto are being offered in their ‘as is’ condition. Accordingly, each apartment should be inspected prior to purchase to determine its actual dimensions, layout and physical condition.” The purchase agreement also stated that no other representations were being made by the sponsor and that the apartment was being sold “as is.”
The agent and the sponsor both moved to dismiss the complaint. The trial court granted their motions, and the appeals court affirmed. The sales agent and the sponsor were off the hook because of the disclaimers contained in the offering plan and the purchase agreement.
Apartment buyers should never rely on representations made by a selling agent unless those representations are specifically incorporated into the purchase agreement or the offering plan. Offering plans and purchase agreements are replete with disclaimers intended to negate representations made outside of them. Purchasers often think that disclaimers are mere boilerplate, but in fact they will be enforced by the courts. And regardless of representations about an apartment’s dimensions, buyers should always get out their own measuring tape – and measure twice.
Victor M. Metsch is of counsel at the law firm of Smith, Gambrell & Russell.