—A Fine Mess
“When the board member sold his apartment to the purchaser, it is likely that he represented in the contract of sale that he had not made any material alterations or additions to the apartment without compliance with all applicable law. This is a representation contained in the standard form contract of sale for cooperative apartments, at paragraph 4.1.6. The representation is made “to Seller’s actual knowledge” which means that the board member would have had to know that the requirements of law were not met for the representation to be false. Also, unless the representation provision of the contract was modified by a rider, the representation does not survive the closing of the sale and could not be the basis of a suit brought after the closing occurred under the indemnification provisions of the contract.
“If the managing agent advised the purchaser before the closing that it was unnecessary for the board member to obtain a sign-off, then the purchaser may have a claim against the managing agent based upon a false representation, relied upon by the purchaser, which resulted in the purchaser being damaged. However, if the representation was made after the closing had occurred, the purchaser probably could not show that it was the managing agent’s statement that caused the purchaser damage, so it would not pay to sue the managing agent.
“Your question states that the cooperative is performing the work needed to remove the violation and legalize the alteration. The cooperative, if it approved the actions of its board member in not obtaining the required sign-offs, may itself be held responsible for the cost of legalizing the alteration. There is at least one case which holds that a purchaser who buys an apartment without knowledge that his seller made an illegal alteration is not liable to the cooperative for the cost of legalizing the alteration if the cooperative had knowledge that the alteration was not lawfully performed.
“The rationale of this case is that the cooperative knew that the alteration was being made, had the ability to compel the prior owner to complete the paperwork needed to legalize the alteration, and its failure to do so should not be at the expense of an innocent purchaser. In this particular case, where a board member was responsible for the violation, it is more likely that the cooperative would be found liable, rather than the purchaser, for the cost of curing the violation. The cooperative can seek recovery from its former board member, who caused the violation.”