Bill Morris in Legal/Financial on December 1, 2017
The 172-unit Newswalk luxury condominium in Prospect Heights, Brooklyn, the site of a bitter, decade-long legal battle over shoddy construction, has reached a settlement worth $1 million with the project’s developer, Shaya Boymelgreen.
“It wasn’t what we hoped for, but it’s way more than we dreamed we would get,” says board president Judy Mann, noting that the original lawsuit, filed in 2007, sought $10 million in damages for construction defects in the converted building, a former Daily News printing plant near Barclays Center.
After buying their apartments, unit-owners had to spend an additional $8 million to make the building habitable. The list of construction defects included bulkheads attached directly to the roof membrane, which caused massive leaks; insulation consisting of flammable wood chips, which caught fire; and faulty waterproofing that caused rebars to rust and concrete to crack. As part of its campaign, the board launched a website called “Shame on Shaya.”
“Shaya Boymelgreen essentially went bust,” says Newswalk’s attorney, David Berkey, managing partner at Gallet Dreyer & Berkey. “We were concerned we would not be able to collect any money without piercing the veils of various LLCs. It would have been extremely difficult to locate assets.”
That worry is over. As part of the settlement, Newswalk will receive $500,000 from an escrow fund Boymelgreen was required to establish, another $360,000 contribution from the developer, and $15,000 from an engineering firm that worked on the conversion. That total – $875,000 – is augmented by two spaces the condo acquired from Boymelgreen under the settlement: an 850-square-foot retail unit, and a laundry room. The bank that held liens on the property’s parking space found a buyer for that space.
The new settlement is the conclusion to an earlier settlement, when state Attorney General Eric Schneiderman announced last summer that he had put an end to Boymelgreen’s “perpetual fraud and abuse in New York real estate.” Under terms of the earlier agreement, Boymelgreen agreed to put money into an escrow fund, and to resolve building violations and construction problems at Newswalk and five other properties he developed in Manhattan and Brooklyn. Boymelgreen was also banned from selling securities, including condos, for two years.
“We got pennies on the dollar, but it’s better than what usually happens today, with litigation favoring LLCs,” says Newswalk’s treasurer, Eric Reschke, who moved into the building in 2003 and has been deeply involved in repair work and the lawsuit. “We have complete control of the building now – and Shaya Boymelgreen is out. We’re in good shape.”
Under terms of the new settlement, Boylmelgreen’s ban on selling securities will expire on Aug. 2, 2018, clearing the way for him to get back into the game of New York real estate.
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