Q&A: Problems with DOB Permit

Q A board member had dormers installed in his apartment which required a permit by the New York City Department of Buildings (DOB). As the project was ending, he told the architect he did not want to do what was necessary to have the DOB sign off on the permit because of “money issues.” He quickly sold the apartment in 2008 and moved out of state. The purchaser was later notified there was a violation. He contacted the seller and was told it was not necessary to have the DOB sign off on the permit because the work took place prior to the requirement of a sign-off. The purchaser then spoke with the managing agent who repeated what the seller said. Now there is an outstanding violation, fine, and work needed to be done to get the required sign-off which the co-op is now dealing with. Who should be held responsible for the expense of the work, attorney, and the fine? The seller, the manager, the board of directors (at that time), or the purchaser?

—A Fine Mess

A “The board member seller was originally responsible to complete his alteration in accordance with the law,” says attorney David L. Berkey, Esq., a partner at the Manhattan-based law firm of Gallet Dreyer & Berkey, LLP. “Once a permit was obtained for the work and the work was completed, the board member should have completed the administrative process by either having his architect certify that the work was properly performed (known as self-certification) or have the work inspected and properly signed off by the Department of Buildings. The board member may also have signed an alteration agreement with the cooperative, in which he agrees to fulfill all requirements of law concerning his alteration.

“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.”

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