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Managing New Condominium Construction Defects in New York City: Insights from the 432 Park Avenue Litigation

Co-ops and Condos

Construction defect litigation comes with the territory of purchasing new condominium construction in New York City. Whether it is warped floors, faulty insulation, or amenities that do not match the offering plan, there are instances when a purchaser’s only recourse against a developer is found in the courthouse. But this course of action is not without its consequences as evidenced by the impact of litigation on sales at 432 Park Avenue.

In 2021, the condominium board of 432 Park Avenue, the condominium famous for its standing as “the tallest residential tower in the hemisphere,” filed a lawsuit against the developers, seeking $125 million in alleged damages due to over 1,500 construction and design defects, including floods, faulty elevators, noise disturbances from building sway, and electrical explosions. The developers denied most claims, alleging the lawsuit was aimed at unjust financial gain. Litigation advanced with testimony from 28 witnesses and over 4 million pages of documents produced, with the suit still pending. The collateral damage from the lawsuit may serve as a cautionary tale to potential litigants: public awareness of the lawsuit resulted in sluggish sales and many owners trying to sell their apartments were forced to lower the prices of their units. For those who are still tempted to litigate, keep reading.

How to Handle New Construction Defects

Defect claims based upon breach of the offering memorandum often must be filed within six years of the initial closing, but sometimes the statute of limitations is even shorter: one year. Failure to act within the statute of limitations may result in unit owners bearing the financial burden of expensive repairs.

In a sponsor purchase scenario, the initial course of action should involve thoroughly reviewing the offering plan to ascertain whether uncovered defects were disclosed. In the event of insufficient disclosure concerning a material defect, it is advisable to communicate the problem to the sponsor, allowing an opportunity for correction.  In the first instance, sponsors may try to avoid litigation by attempting to fix reported defects. However, the fixes may only be cosmetic, and disputes may arise regarding the extent of defects or the sponsor’s obligations. In such cases, the Condominium and Cooperative lawyers at Guzov, LLC, can assist in the process of devising solutions and negotiating resolutions with sponsors.

If you would like to discuss issues concerning condominium construction defects, or any issues relating to cooperatives and condominiums, please contact us to schedule a consultation.

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