First published: Mar 2025
Luxury Turns Into Liability
TAKEAWAY Sometimes less is more and discretion is the better part of valor. When a condo board wants to sue for construction defects, it should be careful about who it names in the lawsuit. This case shows that naming successor sponsor/developers or a sponsor/developer’s individual members unnecessarily can lead to wasted time and dismissed claims. In this situation, since the construction defects were solely created by the original sponsor/developer or on behalf of the sponsor/developer, the claims against the successor sponsor/developers and sponsor/developer executives were thrown out entirely. Significantly, the case also confirms that condo boards can only bring viable fraud claims based on affirmative misrepresentations in the offering plan, not omissions in the offering plan.
THE BD. OF MGRS. OF THE 135 WEST 52ND ST. CONDO. v. 135 W. 52ND ST. OWNER LLC, ET AL
WHAT HAPPENED The 135 West 52nd Street Condominium was converted from the shuttered Flatotel, a luxury 46-story hotel near Seventh Ave., into a residential condominium building consisting of 109 residential units, one retail unit, and one commercial unit. After the unit owners gained control of the sponsor-controlled board, they hired an architect/engineering firm to investigate potential construction defects in the building that many unit owners had complained of. These complaints included: missing firestopping; incomplete fire-rated construction; spontaneous glass breakage in the curtain wall; a leaking pedestrian Galleria and resulting damage to mechanical and electrical systems; missing sprinkler heads and/or inadequate sprinkler coverage; fire system dampers that fail to reset automatically as they should; a leaking boiler flue; a failing heat exchanger; malfunctioning variable frequency drives; and underperforming air conditioning units. In the condo’s legal action, it claims that the sponsor “should not be permitted to simply walk away from a building from which they have made millions of dollars of profits, only to leave the unit owners they deceived in a shoddily-constructed building that endangers the life, safety and well-being of its inhabitants.”
In the condo’s suit, it asserted ten causes: breach of contract due to alleged construction defects; negligent misrepresentation; breach of warranty; fraudulent inducement; breach of the covenant of good faith and fair dealing; violation of General Business Law (“GBL”) section 349; violation of GBL section 350; unjust enrichment; breach of contract due to the lack of a permanent certificate of occupancy; and violation of U.S. Code section 1703 (a) (2) (the Interstate Land Sale Full Disclosure Act).
IN COURT After reviewing all claims brought against the sponsor, the sponsor principals, and the successor sponsors, the court ultimately dismissed all of these claims, except the breach of contract claim against the original sponsor/developer. All other claims against all defendants were dismissed.
COUNSEL for the condo board SCOTT PASHMAN, DANIEL GOODSTADT Cozen O’Connor; for the defendants: 135 West 52nd St. Owner MICHAEL WOOD Cermele & Wood and PATRICK ROHAN Abrams Fensterman; David Bistricer JOSEPH ZELMANOVITZ Stahl & Zelmanovitz; Meyer Chetrit MICHAEL WOOD Cermele & Wood, PATRICK ROHAN Abrams Fensterman, CHANGENE SONG CG Song Law Firm; Clipper 135 West LLC, JOSEPH ZELMANOVITZ Stahl & Zelmanovitz; West 52 Units Owner LLC, PATRICK ROHAN Abrams Fenesterman: Justice Kathleen C. Waterman
