Adam Leitman Bailey, P.C. Makes New Law by Holding Developer Personally Liable for Construction Defects in Newly Constructed Building
A recent decision from the Kings County Commercial Division has upheld contract, warranty, and veil-piercing claims alleged against a condominium sponsor and its principal for construction defects. In this action, the board of managers, represented by Adam Leitman Bailey, P.C. seeks to recover damages from the condominium sponsor and its principals for various construction defects, including lack of fire stopping and defects in the window wall system that have allowed significant water infiltration into the building and units. The sponsor and its principals moved to dismiss pursuant to CPLR 3211(a)(1), (3), and (7), CPLR 3013, CPLR 3014 and CPLR 3016(b). The decision upheld the plaintiff’s claims for breach of contract and breach of warranty. Significantly, the court upheld the claims against the sponsor as well as its principals.
The decision is notable in several respects. First, the court summarily dismissed the sponsor’s argument that the plaintiff lacked standing to bring this action against the sponsor. The court referenced Real Property Law 339-dd, which permits the board to maintain an action on behalf of the condominium unit owners with respect to any cause of action relating to common elements or to two or more units, and plaintiff’s affidavit showing unanimous consent of the board members to commence this action, and therefore dismissed the sponsor’s lack of standing argument as “unsubstantiated.”
Even more significantly, the court also permitted the plaintiff to pursue its claim to pierce the limited liability status of the sponsor and seek damages for breach of contract and breach of warranty from the principals of the sponsor personally. Specifically, the court found that the certification contained in the offering plan, which was signed by the individual principals of the sponsor and incorporated into each purchase agreement, was sufficient to establish a relationship of privity between the individual principals and the unit owners. In finding a relationship of privity between the unit owners and the principals of the sponsor, the court permitted the unit owners’ claims against the individual defendants to stand.
The court further upheld the plaintiff’s claim for breach of express warranty despite the sponsor’s argument that the terms of the offering plan prohibited the plaintiffs from suing the sponsor for money damages as a result of the sponsor’s breach of warranty. The court noted that the plaintiff had adequately pled that the sponsor subsequently agreed to remediate defects covered under the express warranty and then abandoned its duty to do so. As such, the plaintiff’s claims for breach of express warranty were upheld.
Jeffrey R. Metz and Courtney J. Lerias represented Adam Leitman Bailey, P.C. on the motion.