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Adam Leitman Bailey, P.C. Prevails at Making New Law as Appellate Division Finds Second Sponsor Not Liable For Condominium Building Defects

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Court lets Fortis off hook for Williamsburg condo defects

Developer wins argument that shoddy workmanship is board’s problem now

Since purchasing 37 condo units from bankruptcy nearly a decade ago, a Brooklyn developer has denied that it also acquired responsibility for fixing defects in the building. Now, a court has let the developer off the hook.

A panel of Appellate Division judges found that Fortis Property Group isn’t liable for damages or defects that existed at Bayard Views Condominium in Williamsburg before the previous sponsor declared bankruptcy and sold the units.

The developer is only responsible for issues at 20 Bayard Street that its representatives “expressly agreed to remedy,” according to an Oct. 7 order.

The case could have broader implications for determining who is responsible for faulty construction, especially in cases where the original sponsor is shielded from litigation.

“This will encourage and allow the freedom of other people to invest in condo and co-ops,” said attorney Adam Leitman Bailey, who represented Fortis. “This is a really good decision for developers all over New York.”

A spokesperson for the condo board said members were disappointed by the court’s ruling.

“Notwithstanding the issues caused by FPG, the Bayard Views Condominium has taken it upon ourselves to rectify all construction issues,” the board said in a statement. “Our building is today in great working order because of the perseverance of its owners. In the years that have passed while this case languished in the Courts, the owners of 20 Bayard Street did the work to make the building what it always should have been if FPG had kept its word.”

Fortis purchased the Williamsburg condominium’s unsold units in 2011, after the project’s original sponsor, developer Isaac Hager, filed for Chapter 11 protection. Bayard’s condo board sued Fortis in 2014 over various alleged defects, including frequent flooding, bad wiring and HVAC, and cracks in the building’s facade.

In 2017 a state Supreme Court judge ruled that Fortis was not liable for these issues, though he left the door open for the condo board to continue to sue Fortis’ principals, Joel Kestenbaum and Jonathan Landau. The board appealed the former part of the order, while Fortis cross-appealed on the latter.

The appellate court also reversed the state Supreme Court’s decision on Kestenbaum and Landau, finding that they shouldn’t individually be held liable for the defects. The board argued that the repairs would cost $2 million.

description on StreetEasy of the 62-unit building says it is the tallest building on McCarren Park, offering views that “will lure you in” and interiors that “will make you want to stay forever.” A linked discussion from nine years ago flags the workmanship issues.

Still, an upper-floor unit sold for $1,340 per square foot this spring.

Original Article By Kathryn Brenzel


Adam Leitman Bailey, P.C.’s Case Study: 

Adam Leitman Bailey P.C. Wins Co-op’s Right to Retain Multimillion Dollar Security Deposit Post-HSTPA

In one of the first tests of the 2019 Rent Law’s provisions restricting security deposits and prepaid rent, Adam Leitman Bailey, P.C. won for an extreme upscale cooperative in Manhattan, the right to keep the multimillion-dollar, multi-year prepaid maintenance it had negotiated from a foreign national with an unsavory international reputation. Arguing that the prepaid maintenance was not subject to the 2019 law, Adam Leitman Bailey, P.C. preserved the cooperative’s ability to secure itself against its shareholder’s possible defaults.  This was a particularly important victory for the cooperative as the shareholder did ultimately file bankruptcy while owing considerable maintenance to the cooperative, but the cooperative was left unharmed because of the now protected large prepaid maintenance deposit.

Bringing an action in State Supreme Court to declare entitlement to return of the bulk of the prepaid rent, the shareholder argued that the 2019 law made it illegal to retain as security prepaid rent in excess of one month’s maintenance.

Adam Leitman Bailey, P.C., however, argued that the shareholder’s reliance on the 2019 law was misplaced, that the action was based on an incorrect reading of the law, and that the law only forbade asking for such prepaid maintenance, not keeping it. The court then ruled in the cooperative’s favor, dismissing the lawsuit. Soon after this victory, the shareholder declared bankruptcy in a high profile case, making the client realize that if we had lost the case, the money would never have been seen again.

The co-op was represented by Adam Leitman Bailey, P.C. attorneys Adam Leitman Bailey, Carolyn Z. Rualo, Dov Treiman, and Jeffrey R. Metz.


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