Litigation against sponsors all too common - analysis of problems facing apartment cooperative and condominium shareholders when bringing lawsuits against sponsors for construction problems

Litigation against sponsors concerning construction problems in co-op and condominium buildings is all too common. What typically occurs is that as shareholders settle into their apartments, problems throughout the building accumulate and after a period of time, the shareholders unite to confront the sponsor. However, it is rare for shareholders to commence litigation without first giving the sponsor an opportunity to address the issues.

The two biggest problems shareholders face in initiating such lawsuits are applicable statutes of limitations and causation. It often takes a while before co-ops and condominiums commence such lawsuits. When they do, it may be too late for claiming certain theories. Obviously, time is on the sponsor's side.

The other issue is linking the building's problems to the sponsor and the original construction. Leaks and cracks in facades can be due to a variety of problems. In some situations, several factors may be involved.

In most offering plans, sponsors disclaim liability for problems due to normal wear and tear. The disclaimer may include minor deviations from the original plans and specifications, so long as no building codes are violated.. Thus, a common line of defense for sponsors is to claim that the alleged problems are due to normal wear and tear over time.

In most instances these suits are brought by the building, as opposed to groups of shareholders or unit owners. In one recent case, the court found that individual shareholders did not have standing to sue sponsors for actions that affect the cooperative as a whole under the Racketeering Influenced and Corrupt Organizations Act (RICO).

These lawsuits tend to have numerous parties and be very complex. The sponsor will, of course, want to have in the lawsuit all parties who may bear any responsibility. This may include: the general contractor, the architect, the engineer and various other specialty contractors and consultants. Once this many parties are in the lawsuit, it takes a long time to bring such cases to trial merely because of the complexities of completing discovery.

Sometimes a complaint is also filed with the Attorney General's Office. This can: provide a forum for having serious settlement discussions before litigation proceeds.

For this reason, sponsors should make efforts to investigate the validity of these complaints and address them before litigation begins. It is wise to have legal counsel at these meetings and to reduce to writing any agreements made to do repair work.

C. Jaye Berger of Law Offices of C. Jaye Berger is an attorney in New York, City who specializes in building construction, real estate and environmental law. The firm represents a number of owners, contractors, architects, and interior designers. Ms. Berger has written a book about hazardous substances in buildings, which was published by John Wiley & Sons in 1992.

Copyright 1992. C Jaye Berger. All rights reserved.

COPYRIGHT 1992 Hagedorn Publication
COPYRIGHT 2004 Gale Group