Plaza Condo Owners Hit by Lien
April 16, 2009; updated April 20, 11:36 a.m. ET; April 21, 2:45 p.m. ET; April 24; 9:29 a.m. ET — You've just bought a posh condominium overlooking Central Park. It's the newly refurbished portion of a distinguished hotel, and you couldn't be happier.
Then you get the letter. "To whom it may concern," it begins. "We represent Component Assembly Systems, Inc., a subcontractor [on a project in your building]. Please find for service upon you a copy of a Notice Under the Mechanic's Lien Law filed in the office of the Clerk of the County of New York on April 3, 2009."
You read further and find that the lien is for $8,334,400, and that you are responsible for a proportionate share.
It's a scary scenario — and it's happening right now to the much-ballyhooed Plaza Hotel Residential Condominiums at 768 Fifth Avenue and Central Park South.
According to papers filed with the county clerk, the bare bones facts of the case are simple: Component, a subcontractor on the renovation work begun at the Plaza in 2006, was reportedly not paid by the developer, Elad Properties, a.k.a. El-Ad Properties. According to Mark A. Rosen, of McElroy, Deutsch, Mulvaney & Carpenter, the attorney for Component, the balance is "due on what is an approved contract and monies are also due for additional work approved by Elad."
What that means is that, in theory, unit-owners cannot refinance or sell their units until the lien is lifted. "It is a big pain in the neck," says attorney Steve Sladkus, a partner at Wolf Haldenstein Adler Freeman & Herz who is not involved in the case.
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A spokesperson for Elad asserts, "There is no validity to the charges," while attorney Aliza Ganza, counsel for Elad, said in a letter to the owners: "Plaza retained Component to perform certain carpentry and other services at the Plaza Residences. The dispute, initiated by Component, arises from its own unreasonable position at the close-out of its contract, demanding considerable monies for which it has no entitlement. Indeed, Plaza has met numerous times with Component and attempted to resolve the dispute; however, Component persists with its unsupported and excessive demands." The developer promises to fight and also, at no cost to the residents, indemnify the owners and provide the services of its outside counsel, as needed.
Rosen, the Component attorney, disputes this scenario, and says that his client did the job requested and should be paid for it. He has offered to go to binding arbitration, as required in the contract, but he says that Elad has refused.
Sladkus and other attorneys say the problem is more bark than bite. "It's a way to get attention," says attorney James Samson, a partner at Samson Fink & Dubow.
To begin with, says Sladkus, a condominium owner is not legally liable for actions taken by the developer — hence, they are not responsible for the money the developer owes. As for the freezing effects of the lien, the board should immediately insist that the developer post an $8 million bond and take all actions necessary to remove the lien from the units not owned by the sponsor. The bond will protect the owners until the action is resolved in court or through a settlement.
The end result? A nuisance, not a nightmare. "It's like the dispute [between the developer and the subcontractor] is a car splashing the unit-owners with mud," says Sladkus. "The owners were just standing there when they got splashed. They didn't do anything. They shouldn't have to pay the dry cleaning bill."