Construction Defects Abound In New Buildings Citywide

Real estate lawyers throughout the city are fielding more and more calls about faulty construction these days, leading many to wonder if the current development boom is a repeat of pre-bust building tomfoolery. From crumbling concrete facades to unusable balconies and mysteriously flooding apartments—all in new buildings—the Times reports that the pace of the market is putting pressure on "untested" developers and those they contract to merely finish a job rather than finish it with rigor.

All of the examples the Times draws upon are in Brooklyn. At 500 Fourth Avenue, a building completed in 2010, a partial vacate order issued by the DOB keeps buyers from using their balconies after concrete fell from the building and an inspector determined cracks in the balconies permeated its facade. An independent architectural firm hired by the condo board found that the building's facade had not been laid properly. Now, the building is undergoing a $1 million repair job. "Clearly, no one buys in a luxury building and weeks in expects to do a $1 million construction project," the president of the condo board told the Times. Meanwhile, dozens of lawsuits exist against one of the building's sponsors, Isaac Katan, who is also behind The Crest at 302 2nd Street and Park Slope Views.

The condo building at 550 Grand Street in Williamsburg, redone in 2011, is also plagued by defects: a failure to connect the storm drainage and sewer systems led to flooding, mold, and all the nastiness that accompanies that in at least one of the building's apartments. The Times uncovered that mid-build, the project traded hands to EcoRise, a consortium of people pretty unequipped to develop a building, who dodge responsibility for the development's shortcomings. As per the Times, a lawsuit filed by the condo board claimed that the HVAC system was not properly installed; a new roof was never installed; the sponsor never applied for promised tax abatements; and sprinkler heads and other fire-stopping measures were missing or nonfunctional. One party behind the developer argued, in a motion to dismiss the case, that most of those things could be pinned on the failings of the board.

All this goes to say that to whom the blame is due in projects like these can be hard to determine. It often, the Times explains, belongs to building sponsors who are difficult to pin because they "frequently use limited liability corporations that dissolve after all units sell" which makes it hard to find anyone to hold liable. The rate at which new projects are being undertaken and the intense demand for new apartments has led to what can almost be called a real estate bait and switch: by the time buyers are affected by construction shortcuts or shortcomings, the sponsorship has disbanded and the individuals behind the development are often onto the next one.

The shoddy workmanship also puts the unknowing, affected buyers in a tricky situation. The Times explains that litigation, if buyers seek legal intervention, can carry a stigma, "Buyers are often reluctant to bid on an apartment in a condo that has been labeled defective—and with good reason. Banks will rarely refinance a loan or lend to a buyer in a building with ongoing litigation. Legal fees and repair costs pile up. Owners, meanwhile, fear property values will plunge if word gets out that their building has defects." Also, the city's frenzied real estate market often doesn't allow time for buyers to do their due diligence in investigating the developer's history before the apartment they're considering is swept out from under their feet. It's a vicious cycle.
· New, but Far From Perfect [NYT]