SHODDY NEW CONSTRUCTION, P.3

 

With report in hand, you or your attorney can contact the sponsor or his attorney. "You don't want to hit a sponsor up piecemeal, but with everything at once," says Steven D. Sladkus, Reich's real estate department co-head at Wolf Haldenstein. "If you hit him piecemeal, he'll say, ‘You know what? You guys are never satisfied.' You want to give a comprehensive look at all the problems up front."

Sometimes, with such a nuts-and-bolts report in hand, everyone's reasonable and formal arrangements will be made detailing how and when substandard conditions get fixed. Usually not, though. Sponsors, if they respond at all, might deny there are problems or blame the contractor, who might blame the subcontractor, who might blame the workers, and so on down the line.

Before it goes on too long, you need to make a choice: either complain to the attorney general's office or skip that step and go straight to litigation. The Link residents' attorney did the former. Whether it was that or simply the continuing exchange of attorney letters, the residents group was finally able to make formal contact with the sponsor — who, the residents say, had refused to even address them before this. (Elad declined to comment.)

Whatever the case, the sponsor, as of mid-July 2007, had finally taken specific action toward addressing the building-wide problems and was currently communicating with the residents. "I believe that we are now being informed because of all the pressure put on Elad from the homeowners," says Donna Feig, one of the condo owners. "Thanks to Brian and his efforts, Elad is responding better to our concerns."

That's as it should be. Because, as Braverman says of the next step that you might have to take, "the problem with construction litigation is that it's very time-consuming and costly. There's a tremendous amount of discovery involved."

General Contracting

So you hold off on litigation for the moment, and you or your lawyer contacts the state attorney general's office. New York State's Martin Act regulates the sale of co-op shares and condo units and is the law that requires an offering plan. But responsibility for enforcing the act falls exclusively upon the attorney general — which means that condo owners can't bring their own lawsuits for violations of the act, "even if the violations are egregious," ruled a judge in 2005. And that's troublesome when the AG declines to act on the act.

"The attorney general's office used to get involved," says Reich, "but about three years ago they felt they were spending too much time dealing with those issues and stopped taking action. The AG or some other agency should be there to help the unit-owners. But there's no real avenue."

"The first step has to be the attorney general's office, if for no other reason than to check it off the list," says attorney James Samson, a partner in Samson, Fink & Dubow. "Call them up. But it's a[n exercise in] futility."

Rosengart concurs. "There's presently no enforcement staff in the Real Estate Financing Bureau," the longtime assistant attorney general says of the office that, by its own public definition, merely "seeks to prevent fraudulent real estate offerings by requiring [that] offering plans and related financial information be made available to the public."

"The attorney general process is a joke," adds Dan Pelson, the four-year-veteran board president at 30 Crosby Street. "They want to keep development going because it's good for the city, and I get that; I agree. But you can't turn your back on what's happening. People are buying into buildings not built to spec, built with inferior materials, and not up to code."

"They say they're going to have an enforcement staff," says Rosengart, "but it's been seven months and [new Attorney General Andrew M.] Cuomo hasn't employed anyone." (The attorney general's office did not respond to several e-mails and phone calls directed to both its New York City and Albany offices over several days.)

One highly public case where the attorney general did get involved is a cautionary tale for condo owners. About a decade ago, the brick warehouse at 195 Hudson Street in Tribeca was refurbished into 27 units that sold for prices ranging from $600,000 to over $3 million. And for that money, the owners got fireplaces that didn't work, nonexistent (although promised) video intercoms, and other examples of what the residents told the attorney general's office in mid-2000 were instances of building systems that did not match those described in the offering plan.

"The unit-owners' first claim was for something like $2 million," recalls Rosengart, who tried negotiating a settlement. "The sponsor offered $800,000. The president of the board, with board approval, said, ‘Get us $1.5 million and we'll settle.' The sponsor howled but finally agreed and said he needed my word that if he made that offer then I wouldn't sue him." Some additional back-and-forth made the settlement "$1.5 million in cash and some work valued at a little more than a half-million," says Rosengart — but then the sponsor missed his payment deadlines.

Next >>