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Court Holds Condo Unit Purchasers May Allege Cause of Action Against Architect for Breach of Contract as Third Party Beneficiaries of Sponsor’s Contract With Architect

A husband and wife purchased what they believed would be their new “dream” home in the sky, a penthouse apartment located on the 31st floor of what was marketed to them as a “luxury” condominium for which they paid in excess of $4 million dollars.

From the very day they moved into the apartment, it was clear that there were several construction defects which made living conditions in the apartment almost nightmarish and hardly “luxurious.” Among the many construction defects that existed in the apartment, the most serious was the failure of the heating, ventilation, and air-conditioning (“HVAC”) system to function in accordance with the sponsor’s offering plan representation that the purchasers would receive a functioning HVAC system that met applicable governmental requirements for comfort and efficiency.

Contrary to the representation contained in the offering plan, during winter months, when indoor temperatures could not be maintained above 68 degrees Fahrenheit, the purchasers froze, and during summer months, when indoor temperatures could not be maintained below 75 degrees, they sweltered. As a result, the purchasers hired Adam Leitman Bailey, P.C. to get corrective action from the sponsor and to obtain compensation for the many construction defects they found in their apartment.

Adam Leitman Bailey, P.C. found that the description of the HVAC system for the purchasers’ penthouse apartment, which was contained in the sponsor’s offering plan, had been supplied to the sponsor by the mechanical engineering firm that had designed the HVAC system. Adam Leitman Bailey, P.C. also determined that the heating and cooling problems in the apartment resulted from a faulty design which called for the installation of an HVAC system that was not sufficiently sized to meet the heating and cooling requirements of the penthouse.

When the sponsor rejected Adam Leitman Bailey, P.C.’s demands that it provide the purchasers with compensation for the living conditions caused by the failed HVAC system, Adam Leitman Bailey, P.C. sued both the sponsor and its mechanical engineer to compel them to give the purchasers compensation for the unbearable living conditions they had been forced to endure from the improperly designed HVAC system. The complaint in the action alleged that the mechanical engineer was liable to the purchasers because the engineer was responsible for the negligent misrepresentation of the HVAC system that appeared in the offering plan, that the purchasers had relied upon the inaccurate description of the HVAC system to their detriment, and that they were therefore entitled to compensation for the harm they had suffered as a result.

The mechanical engineer moved to dismiss the purchasers’ cause of action for negligent misrepresentation on the ground that there was no “privity” or special relationship between it and the purchasers that made it liable for anything stated in the offering plan concerning the HVAC system. However, the court ruled that the purchasers’ complaint did state a cause of action for negligent misrepresentation against the engineer because there were sufficient allegations that the engineer knew or had reason to know that the representations contained in the offering plan were false at the time they were made, that the representations would be relied upon by prospective purchasers of the sponsor’s condominium units, that the purchasers did in fact rely upon the false representations, and that these alleged facts were sufficient to create the “privity” or special relationship required to hold the engineer liable to these purchasers.

With decisions such as these, Adam Leitman Bailey, P.C. is helping to reshape the law to protect the rights of “new home” condo and co-op buyers to ensure that they are properly compensated by all those responsible for construction defects that cause buyers to suffer sub-habitable living conditions.

Adam Leitman Bailey and John Desiderio of Adam Leitman Bailey, P.C. represented the client in this matter.

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