Setting New Precedent, Adam Leitman Bailey, P.C. Obtains a Victory for Condominium Board
In The Board of Managers of 266 West 115th Street Condominium v. 266 West 115th Street, LLC, et al., Index No. 159552/2014 [Sup Court, NY County 2013], a precedent-setting decision, Adam Leitman Bailey, P.C. obtained a victory that could benefit condominiums throughout Manhattan. The following two critical issues were presented in this case: (i) whether a principal of a sponsor may be held personally liable for damages resulting from construction and design defects affecting the condominium where the principal executes the certification to the offering plan in his/her individual capacity; and (ii) whether a sponsor waives the notice requirement contained in the offering plan when the sponsor voluntarily engages in repairs beyond the relevant notice period. While some courts in New York have found that a principal of a sponsor that individually executed the certification to the offering plan was personally liable for construction defect claims under a veil piercing or alter ego theory, no courts in the First Department had yet resolved this issue. In addition, there were no cases in New York that were directly on point on whether a sponsor waives the offering plan notice requirement to submit timely written notice regarding defects where the sponsor returned to the property to make repairs after the expiration of the subject notice period.
In this matter, the condominium board commenced a lawsuit against the sponsor, as well as its principals, alleging, inter alia, damages flowing from construction defects, and seeking to hold the principals of the sponsor personally liable for such damages under an alter ego theory because the principals executed the certification to the offering plan explicitly representing that the building would be constructed free from material defects. Subsequently, the sponsor and its principals made a motion to dismiss the condominium board’s complaint. The sponsor argued that the condominium’s breach of contract claims should be dismissed because the board and/or unit owners failed to notify the sponsor in writing of defects within 30 days after the closings of each unit pursuant to the offering plan. Although it was undisputed that no written notice was ever timely tendered by the board and/or the individual unit owners, Adam Leitman Bailey, P.C. argued that because the sponsor repeatedly elected to repair defects within the condominium and individual units from 2008 through 2013, the sponsor waived the provision of the offering plan requiring written notification concerning defective conditions. The court agreed with Adam Leitman Bailey, P.C.’s arguments in denying the branch of the sponsor’s motion to dismiss the board’s breach of contract claims. Further, in siding with Adam Leitman Bailey, P.C.’s argument, the court held that since the sponsor’s principal signed the certification individually, the principal may be pursued in his/her individual capacity under an alter ego theory for knowingly and intentionally advancing the misrepresentations of the offering plan.
The decision allows condominiums to prosecute their construction defects cases against the sponsor’s principals, individually, where those principals signed certifications to the offering plan and is likely to be cited as precedent in the First Department. Additionally, the decision will be cited in every department in condominium cases involving a sponsor’s waiver of the offering plan’s notice requirements related to defective conditions where the sponsor made repairs to the condominium on its own volition after the expiration of the applicable notice period.
Adam Leitman Bailey, P.C. argued the matter before the Supreme Court, and Rachel M. Sigmund McGinley drafted the opposition papers to the sponsor’s motion to dismiss for the condominium.
Birnbaum v. Yonkers Contr. Co., 272 AD2d 355 [2nd Dep’t 2000]; see alsoZanani v. Savad, 228 AD2d 584 [2nd Dep’t 1996].
Board of Managers of 184 Thompson Street Condominium v. 184 Thompson Street Owner LLC, 106 A.D.3d 542 [1st Dep’t 2013]; see also 20 Pine St. Homeowners Assn. v. 20 Pine St. LLC, 109 AD3d 733 [1st dep’t 2013].