As more and more new condominium construction projects are built, completed and sold off (as well as cooperatives and homeowners associations, although less common) there has been a correspondingly large number of what have come to be known as construction defect cases making their way through the New York courts.
A “construction defect” case is a lawsuit brought by a condominium on behalf of its unit owners against the condominium’s developer (commonly known as the “sponsor”), and sometimes other parties that were involved in the condominium’s construction, as a result of discovering defects in the manner in which the condominium was built. Some common construction defects include: faulty roof or façade installation resulting in water leaks; defective installation of the plumbing systems resulting in noisy pipes, leaks, or poor water flow; failure to properly submeter gas or electrical utilities; defective installation of kitchen, bathroom or other fixtures inside the units; and defective installation or pouring of concrete resulting in sinking sidewalks or courtyards.
In order to resolve these defects, there are several types of legal claims which can be commenced against the sponsor and potentially other parties involved in the building’s construction. It is important that these legal claims are commenced in a timely manner because they have expiration dates known by the legal term “statute of limitations.” In addition, as detailed below, sponsors’ assets typically diminish over time, so if an association delays filing legal claims it may not be able to collect upon or enforce a court order because the sponsor entity may be insolvent.
Breach of Contract
The strongest claim available to condominium purchasers in construction defect cases is typically a claim for breach of contract. In order to prevail on a legal claim for breach of contract, the plaintiff must prove: the defendant’s breach of its obligations under the contract and damages suffered by the plaintiff as a result of the defendant’s breach. Courts have held that the statute of limitations for a breach of contract claim in a construction defect case begins to run from the date that the sponsor closed on the sale of its first condominium unit in a particular building.
The condominium sales process begins when an individual signs a contract known as a purchase and sale agreement with the condominium’s sponsor and is completed at the unit sale closing. The purchase and sale agreement sets forth the obligations of both the purchaser and the sponsor with respect to the purchase of the unit and any post-closing obligations such as warranties. The purchase and sale agreement incorporates the terms of the sponsor’s offering plan by reference and, as a result, the offering plan becomes part of the contract between the unit owner and the sponsor.