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Major Legal Win for Condo Boards

Financial District

Sponsor Fraud
June 8, 2016

In a ruling that could have major consequences for condo boards across the city, the Appellate Division has upheld an earlier State Supreme Court ruling that a sponsor/developer can be held liable for breach of contract and its principals can be held liable for fraud over construction defects and misrepresentations in an offering plan.

The ruling stems from a $10 million lawsuit filed in 2012 by the South Star, a 150-unit condo in an Art Deco building in downtown Manhattan, which claimed that the sponsor/developer, WSA Equities, oversaw renovation work that led to leaks and millions of dollars in damages to the building.

“That the Appellate Division upheld the earlier ruling is very rare,” said Jared Paioff, an associate in the law firm of Schwartz Sladkus Reich Greenberg Atlas, which represents the South Star. “Most condo boards are reluctant to commence these lawsuits because they figure that even if they prevail, there won’t be any money if the sponsor is insolvent. But this ruling makes it possible to go after the principals, who do have money.”

WSA Equities is owned by the Gansevoort Hotel Group. Attorneys are now preparing for a possible trial.

“We expect that this case is something a jury will get to decide,” Paioff said.

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