Faulty Towers: Complaints About Condos on the Rise

I read this article with great interest, as an owner of a new condo. I thought the article lacked perspective, and was more-or-less an advertisement for the condo lawyers. I can't speak for other buildings, but I'll relate my own experience, and I don't think it is a-typical.

My condominium was built in the early part of the bubble (2004), by one of the most famous Brooklyn developers associated with that recently-departed era. We purchased our units at $500/square feet, and I consider it to be a quality product. Recent resales are around $725/sq ft - about a 45% upside.

I was the president of the first board, and we took over from the developer/sponsor after about 1/2 year. Soon after we moved in, two major problems became obvious, though neither was structural in nature. One was immediately fixed by the sponsor without prompting, the other after protests from the owners.

After these obvious problems were fixed, we hired an engineer to assess the building, to determine if there were any remaining, not-so-obvious issues. He developed a list of minor punch-list items that totalled about 1% of the original purchase price of the buildings. I advocated that we negotiate with the sponsor on these issues. Over the next 1`/2 year, he fixed about half of these items, so we had miscellaneous small issues that came to about 0.5% of the purchase price.

After these fixes, the sponsor dragged his feet with the remaining problems. Two things became obvious: a) as the bubble continued to heat up, he was having problems finding reliable contracters willing to take on this small work; b) I sensed that the sponsor/developer was running into financial trouble.

I continued to advocate that negotiation was the best way. My point was that even if we had to swallow this 0.5% in punch list costs, we were still way ahead of the game. We had hit the real estate cycle right: we had purchased a quality product at a good price point, and now we had 44% upside. It also seemed to me that this amount did not warrant the expense of a lawsuit.

I could not sell this proposition to the other shareholders, and had to resign the board under fire. The subsequent boards have hired lawyers, who, of course, are more than happy to advise them that they deserve everything that they were promised in the contract. Of course, that advice comes at a fee of $350/hr. Well, here we are, a few years later, plenty of money has been spent on lawyers, and nothing has happened ( in terms of the developer fixing these remaining problems). Meanwhile, the developer is now teetering on the verge of bankruptcy.

In summary, reason often doesn't prevail in these situations. There is a sense of entitlement that seems to infect all NY real estate, be it condo purchasers or rent stabilization tenants.

Posted by: benson at October 26, 2009 9:52 AM

Antidope;

Well obviously you are talking to the owners who pressured me to resign, and I think they are giving you their spin.

Well, here are a few facts that can be checked, as they are a matter of public record, since you obviously know what I'm talking about:

-the flooding in the lower duplex's was one of the two start-up issues that I mention above, and was resolved (as i also said above). The Sponsor installed back-up prevention systems in each of the lower duplexes. There has not been a flood in more than three years.

-the flood due to the 2nd Street tower had NOTHING to do with the SPONSOR of our condo, which is what I was talking about above. Obviously one of the principals of that 2nd Street tower was also one of our sponsors, but from a legal point of view, they were a separate entity. Hence, the issue had to be resolved via our building insurance, which it was over two years ago. Our insurance company made a claim against that 2nd street tower construction company, and we received a large settlement to repair the damages.

Actually that latter situation perfectly illustrates my point in how unreasonable folks can be. Despite numerous explanations that the legal entity behind the 2nd Street tower was NOT our sponsor, and therefore it could NOT be resolved through the AG's office (which handles prospectuses) folks would not hear of it.

That was a very tumultuous time, and I became personally unpopular in my condo because of it. I still stand by my story above.

Posted by: benson at October 26, 2009 10:56 AM

Antidope;

Yes, we hired a well-know architectural engineering firm (begins with "R") to assess our problems, and they provided the estimates of what it would take to fix them. This was one of my first acts as president of the condo.

JTB;

It was never clear what exactly happened with that incident. At that time, the 2nd Street tower was mostly still a steel skeleton, and it seems that somehow all of the rainwater was channeled within the skeleton so that it impinged like a water cannon against the exterior of our 2nd street wall. Our wall had not been thoroughly water-proofed, because we were expecting the 2nd Street tower to abut aginst it. Alas.....

Posted by: benson at October 26, 2009 11:32 AM

Antidope;

I think I know which condo in the area you are talking about (when it comes to 12-17% of original purchase price).

JTB;

I can't make any statements on the COO matter, as I am no longer on the Board.

Posted by: benson at October 26, 2009 11:59 AM