Real estate in the New York Metropolitan area is hot. Ask any broker and they will tell you that their job is getting more and more difficult because there is simply no supply. Many sellers are having a hard time committing to a sale because of uncertainty as to whether tomorrow’s market may be able to generate a higher price or whether we’re experiencing the last gasp of a market boom period. In the superheated market, buyers are feeling tremendous pressure because sellers are demanding that contracts of sale contain few, if any, contingencies and the line of people bidding on a single apartment results in very short turn-around times for the execution and delivery of binding contracts. Sellers in this market look to bidders who are willing to sign a contract as quickly as possible; in many instances without concern for a purchaser’s need to perform their due diligence. The question then for the prudent buyer is who to rely upon when seeking representation about a co-op corporation’s or condo association’s condition when the time to verify such conditions independently may be short.
A Seller’s Duty to Disclose?
When looking at the people who should be responsible for making representations about an apartment or a building’s physical or financial condition, the logical choice would be the seller. Unfortunately, though, in a hot market it is not likely for a seller to make any representations except those set forth in the standard form of contract of sale. While those representations include, among other things, that the apartment will be conveyed free and clear of any liens, vacant and in broom-clean condition with the appliances in working order, they do not address many important things that could affect a buyer’s decision to proceed with a transaction. For example, two factors that could have a great impact on the affordability of the apartment are the financial condition of the co-op corporation or condo association and the physical condition of the building and the building systems servicing the apartment. The law imposes no duty upon a seller to disclose anything about these conditions. In fact, the basic theory in New York is "caveat emptor," meaning, "let the buyer beware." This theory is supported by the well-settled principal that a seller has no duty to speak when the parties deal at arms length; the mere silence on the part of a seller without some act or conduct that amounts to concealment is not actionable. Therefore, unless a seller takes affirmative action that prevents a buyer from determining the existence of an adverse condition (i.e., painting over a wall that is the subject of constant leaks), a buyer has no recourse against a seller on account of that condition.
However, federal law imposes a duty of disclosure upon sellers when certain environmental conditions are known to a seller, as in the case of lead paint, and there are instances where deficiencies are so dangerous that a seller has a duty to inform a buyer of that condition, as in the case of contaminated water. While these disclosures are certainly of great importance, they do not address many typical concerns of buyers when purchasing a co-op or condo.
Don’t Look to the Broker