Here we go again. Just as there was a flurry of litigation over construction defects in new and renovated condo buildings during the last housing bubble, lawyers report that the current market is bringing a new wave of complaints from buyers, along with their inevitable companion, lawsuits. Today’s problems, lawyers say, are similar to the those that bedeviled new condo owners when the market crashed in 2008 – including falling masonry, unstable balconies, leaky roofs, and improper sewer connections.
“As the market softens and developers rush to get projects done, corners are invariably cut,” attorney Steven Sladkus, a partner at Schwartz Sladkus Reich Greenberg Atlas, tells the New York Times.
Since developers typically control condo boards for several years after a building opens, few condos built during the recent recovery have yet to file lawsuits. Expect that to change. “There is going to be a spike [in litigation] in the next couple of years,” as more buyers settle into their homes and begin noticing problems, predicts attorney Rob Braverman, a partner at Braverman Greenspun.
Many of them will have to clear a new hurdle. Most developers form limited liability corporations, which are frequently dissolved after the building is complete. In May, a state appellate court ruled that developers who are principals in LLCs in Brooklyn, Queens and Staten Island cannot be held liable for breach of contract just because they signed a certification in the offering plan. The ruling brought the three boroughs in line with Manhattan and the Bronx – and made it more difficult for disgruntled homeowners to recoup money from developers.
More difficult, but not impossible. “There are other ways to skin a cat,” Sladkus says. The ruling “took away one of our tricks, but certainly didn’t ruin the game.”
But it’s not a cheap game. “It’s really hard to pierce the corporate veil,” says real estate attorney Adam Leitman Bailey. “It takes a lot of money.”
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