Adam Leitman Bailey, P.C. Secures Largest Condominium Construction Defect Settlement in Brooklyn History
In 2018, Adam Leitman Bailey, P.C. was retained by a group of unit owners at a new construction condominium in Williamsburg, Brooklyn. The new build encompassed an entire block and contained over 200 units consisting of one to three-bedroom units, duplexes, lofts, penthouses and townhomes.
On paper, the building sounded wonderful. In reality, however, the building was plagued with construction defects and shoddy workmanship from the start. Shortly after moving in, residents quickly discovered a myriad of issues including leaks from ceilings, windows and terrace doors, excessive air at windows and doors, noxious smells permeating from unit to unit, and various discrepancies in the finishes and quality of construction from promised in the offering plan.
In 2017, the original owners knew these issues were just the tip of the iceberg. They realized they needed to take action to protect their investment, and, most importantly, to keep their homes safe. They formed a group of leaders and a search committee to find the best law firm in New York to represent the building. Upon being hired, Adam Leitman Bailey met with the owner group consisting of 12 unit owners.
Adam Leitman Bailey immediately called a town hall meeting to raise funds and rally more unit owners for the cause. The meeting worked, and the homeowner association was plush with funds and showed a strong display of force against the sponsor.
Knowing the Attorney General’s office was not taking any new construction cases since it was still resolving cases from a prior Attorney General, Adam Leitman Bailey, P.C. needed to show a Martin Act violation or fraud by the Sponsor to have the Attorney General become involved. After digging and investigating, one of Adam Leitman Bailey’s connections handed him an engineer’s report commissioned by the Sponsor directly from China that reported major construction problems in the building. The report was completed before any of the units were sold to the public making this a major Martin Act violation. The Attorney General took the case, which was a big boost to getting the Sponsor based in China to complete the repairs to the building.
The group of unit owners contributed their own funds to fight the sponsor to repair the building and bring it in line with the promises made in the offering plan and all applicable codes. This allowed unit owners to engage an engineer, which was done through Adam Leitman Bailey, P.C., to preserve attorney-client privilege. The engineer performed a top-to-bottom forensic investigation of the building, which revealed: non-compliance with fire stopping and other fire retardant Code requirements throughout the building, involving fire/safety issues arising from (a) missing and/or poorly installed fire stopping in stairwells and elevator shafts and between apartment floors and units; (b) exterior masonry walls not fire rated; (c) exterior passageways from the interior courtyard not fire separated to protect occupants exiting from the courtyard; (d) window wall assembly not fire rated; (e) shoddily built corridor fire partition walls (not fire rated), and shoddily built tenant separation fire partition walls (not fire rated or built to specification); and (f) garage sprinkler main exposed to the elements and susceptible to freezing in cold weather, among other things.
In addition to these egregious fire safety issues, the engineer discovered extensive roof deficiencies including improperly installed flashing/waterproofing, ventilation issues and countless offering plan discrepancies in the finishes and quality of workmanship provided. All of these issues were in express contradiction to the representation made by the Sponsor in the Offering Plan, which stated that the “construction of the Building will be completed in accordance with the Plans and Specifications and applicable law.”
With the engineer report in hand, Adam Leitman Bailey, P.C jumped into action by sending it along with a demand letter to the sponsor that each of the issues identified therein is remediated.
The Attorney General’s office was also sent a copy of the report and demanded that the repairs be made. A few months later, a finding was made that after the Attorney General’s office conducted its own investigation that the egregious defects in the building, together with the sponsor’s continued sale of units without amending the offering plan to disclose such defects – a patent Martin Act violation. So, any time the work to repair the building slowed or negotiations slowed, the Attorney General was called to get involved with a heavy hand.
This was the start of what would become a four-year battle with the sponsor. During the ensuing years, various meetings were held, including a monumental settlement meeting in March 2020 where attorneys and engineers for both sides were present along with several unit owners and sponsor principals. At this meeting, the sponsor made a number of agreements with respect to the work it would do to repair the building. One of the agreements made at the March 2020 meeting was that both sides’ respective engineers would conduct a joint walk-through of the building to identify as many issues as possible, which would then be memorialized in a joint report. We thought the case had been settled and only the finishing touches had to be finished. Following the March 2020 meeting, however, the sponsor fired its lawyers, we assume, for entering into this settlement agreement to fix the building. New counsel refused to honor the promises made at the March 2020 meeting. Many of the agreements made at the meeting were not honored. In addition, the COVID-19 pandemic ensued and put a halt to all construction work and in-person meetings/walk-throughs of any sort.
Anticipating that these events would jeopardize the ongoing settlement, Adam Leitman Bailey, P.C. immediately invoked assistance from the Attorney General’s Office (who, as noted above, had already agreed to commence its own investigation) to facilitate the resolution of the various issues plaguing the building. With the help of the Attorney General, the sponsor and new attorneys agreed to proceed with the joint engineering investigation (by this point, many of the COVID-19 restrictions had been lifted and inspections were able to proceed).
The engineers for both sides conducted numerous site visits to inspect the building and its various components. After many months, the joint report was finally issued. Now came the incredibly arduous task of getting the sponsor to accept responsibility for each of the issues without conducting extensive probes to prove the exact scope of each defect. The sponsor was entirely adverse to extrapolating the engineers’ findings to areas of the building outside the single location where the defect was observed by the engineers.
Through constant advocacy and tireless work, calls, emails, meetings, etc., Adam Leitman Bailey P.C. was ultimately able to secure a landmark settlement for the condominium. The sponsor agreed to pay millions of dollars to the condominium, which was sufficient to cover all of the issued listed in the joint engineering report. In addition, the offering plan required that the board purchase the Resident Manager Unit and five handicap parking spaces from the sponsor for a total cost of over $1 million. Adam Leitman Bailey, P.C. was also able to negotiate the sponsor handing over the Resident Manager Unit and five handicap parking spaces to the board free of charge.
A settlement of this magnitude is extremely rare and Adam Leitman Bailey, P.C. is honored to have been an integral part of achieving justice for the residents of the building after so many years of a hard-fought battle. The group, which eventually took over the board, never had to litigate saving big money for its residents.