Credit: Nadia Pillon
June 16, 2018
By: Ronda Kaysen
Q: I am a board member at an Upper West Side condo that has had issues with leaks. Repairing the problem will be expensive, possibly requiring a five-figure assessment for each apartment. I have been thinking about moving, but now I want to sell quickly to avoid paying the assessment and living through months of construction. Our board does not move quickly and any decision about the repairs is likely months away. The work could ultimately be cheaper than what is currently being proposed. What, if anything, am I required to disclose to potential buyers?
A: In New York, a seller is not required to disclose any adverse information to a buyer. So long as you do not actively conceal the defect, or in this case mislead a buyer about the looming assessment, you haven’t done anything wrong. “The building could be falling down and the seller does not have to tell the buyer,” said Adam Leitman Bailey, a Manhattan real estate lawyer.
But it may be in your best interest to come clean, because the buyer will likely find out about the issue anyway. The board has discussed the problem, the repairs and the potential costs, so the details are in the board minutes. When the buyer’s lawyer reads the minutes as part of the due-diligence process, those discussions will turn up. This is where your legal obligations (or lack thereof) may veer from a good sales strategy.
Imagine being the buyer. You make an offer on an apartment after considering the costs. Your offer gets accepted! You’re so thrilled. You hire a lawyer and start shopping for a mortgage. Then your lawyer tells you that a five-figure assessment and months of construction may be in your future. This could mean that you can no longer afford the apartment. You may feel hoodwinked. At the very least, it would probably sour your opinion of the seller and raise suspicions about other problems that may be lurking.
“Things like this have a way of coming to light,” said an associate broker. “It’s much better to be honest and find a way to work it out.”
Be upfront. Discuss the issue with your broker, who could disclose the possibility of an assessment (and the chance that it may not be so large) to potential buyers so they can make a sound, educated decision. The news may cost you some buyers, but better you lose them before they make an offer than have the deal fall apart during attorney review.
The answer to this question only applies to cooperatives and condominiums in New York State. For homes, the Property Condition Disclosure Statement https://www.alblawfirm.com/wp-content/uploads/2018/06/1614-f.pdf must be filled out and describe any defects or the seller has the option of giving a $500 dollar credit at closing and not fill out the form.