New York State’s highest court shot down a Williamsburg condominium board’s effort to directly sue the principals of Savanna Real Estate, in a move that further enforces the protections created by limited liability companies.

In 2012, residents at 125 North 10th Street sued entities linked to Savanna and also sued the company’s principals, Christopher Schlank and Nicholas Bienstock, claiming their new condos were shoddily constructed, resulting in leaks, flooding, odors and dangerous conditions. An appellate court ruled in May, however, that Schlank and Bienstock were protected from personal liability through their LLC, and thus their names would need to be removed from the suit.

The condominium board pressed forward, pushing the personal liability issue all the way up to the Court of Appeals, where it was finally shot down this month. In an October 17 decision, Judge Janet DiFiore wrote that “the motion is dismissed on the ground that the order sought to be appealed from does not finally determine the action within the meaning of the constitution.”

In other words, because the condo board has not yet been given a decision on its full apartment damage claims (those are still pending in Brooklyn), it’s not a problem the appeals court can really handle just yet.

It is quite rare for this kind of real estate litigation to even reach the Court of Appeals in the first place. Savanna’s counsel, Andrea Roschelle of Starr Associates, said that it was the only condo board-related case she could recall landing at that court since 2009. Roschelle was not surprised with the outcome. “Statutorily, they really had no grounds,” she said. “It would have been easier for them if they had just gone back to the Second Department [appellate division] and said ‘you made a mistake.’”

Jennifer Bock, attorney for the 125 North 10th Street condo board, did not immediately return a request for comment.

Source: https://therealdeal.com/2017/10/27/condo-boards-crusade-against-savanna-principals-struck-down-by-states-top-court/

Over the years, a number of Brooklyn condo buyers filed lawsuits in New York Supreme Court against the actual developers behind the projects they lived in, alleging construction defects. One such case, against real estate investment firm Savanna and their 86-unit condo at 125 North 10th Street in Williamsburg, made its way to appellate court.

The judges in that case have now ruled that claims can only be brought against the development entity, in this case, an LLC. The takeaway: Developers aren’t personally liable for the buildings they put up.

Previously, cases naming individual developers as defendants were justified by developer signatures on the “certification of sponsor,” a document in which stakeholders affirm that all the contents of a new condo offering plan are true and representative. Brooklyn developers singled out in breach of contract lawsuits in recent years include Amir Yerushalmi and Alan Messner. The appellate court department covering Manhattan, however, has established precedent for dismissing cases brought on this argument. With the Savanna ruling, Brooklyn, covered by the appellate division’s second department, has gone the same way.

“For the last few years in the lower courts in the second department, judges have been denying motions to dismiss made by sponsors in construction defect cases,” said Andrea Roschelle, an attorney at Starr Associates who represented Savanna in the 125 North 10th Street case. “This cannot be the only industry in the United States that principals are not entitled to protect their assets by using the corporate form, here an LLC.”

In 2012, buyers at the condo Street sued Savanna and its principals, including co-founders Christopher Schlank and Nicholas Bienstock, as well as architects, management and construction firms involved in the project. Residents complained of hot water flowing through fixtures, deficient heating and cooling systems, flooding in the garage, foul odors and balcony railings unsafe for children. Although many of the firms and individuals were dismissed from the case in a Kings County court, Savanna and partner Investcorp couldn’t get their names removed from the breach of contract suit.

In the ruling, the appellate judges held that the individuals “cannot be held individually liable for the breach of contract alleged by the plaintiff, based solely on violations of the offering plan, merely by their certification of that offering plan in their representative capacities on behalf of the sponsor…”

Jennifer Bock, attorney for the condo board, did not return a request for comment.

This is not the only recent case with big implications for condo developer liability. In April, a Brooklyn judge ruled that Fortis Property Group was not responsible for defects at condos it sold after acquiring them from their original developer, Isaac Hager.

Source: https://therealdeal.com/2017/06/01/attention-brooklyn-condo-buyers-good-luck-trying-to-hold-your-developer-personally-accountable/

The city will replace overflowing old sewers in a “private” section of Sheepshead Bay — even though it is not required to do so — to prevent future flooding.

Private sewer pipes connect dozens of houses in the neighborhood’s so-called “courts” to the city’s public sewer line, and the city is not responsible for their repair or reconstruction. But the conduits are in such crappy shape that the city offered to replace them this one time if the residents paid dues to a homeowners association in order to fund future maintenance. Locals initially balked at the idea, because they considered the association dues a tax, but now they are coming around, according to one local who hopes the city-funded fix will last several lifetimes.

“Hopefully, the city gets everything up to par and we won’t have to worry about this — would be good for 100 years,” said Stanton Court resident Mike Rodriguez, who previously pooh-poohed the homeowners association.

Homes in the area, which sit about 5 feet below sea level, often flood with sewage when there’s a heavy rain.

Many of the homes are slated to be raised or rebuilt through the city’s Sandy-recovery program Build It Back — contractors will rebuild 17 of them and elevate 15. But fixing the homes wouldn’t prevent future damage if the pipes remained shoddy — so the city agreed to replace the private infrastructure on the taxpayer’s dime so long as the homeowners maintain things in the future, a spokesman for the federally funded program said.

“Build It Back is committed to providing homeowners with resilient houses and communities. A Homeowner Association will enable residents to address issues with their internal sewer infrastructure collectively for the first time ever in an efficient and cost effective manner,” said Matt Viggiano. “These upgrades will address long-standing issues related to their internal sewers, something the residents have prioritized and something we hope to provide.”

Build It Back contractors will replace the sewers as it conducts home reconstructions — and the new underground sewer system is currently being designed as homeowners tighten up the loose ends to form the association and prepare to send off the required information to the State Attorney General’s office, he said.

And because the process is lengthy and complicated, the city reached out to Brooklyn Legal Services, who then put pro bono attorneys from a Manhattan law firm in touch with the homeowners, said director Jennifer Sinton of Brooklyn Legal Services.

Attorney Evelyn D’Angelo from Starr Associates met with the group interested. D’Angelo’s practice is centered around the formation of Homeowners Associations and through her knowledge of the process, the state usually approves them in cases like this one, she said.

“It’s my understanding in these Build it Back programs, the Attorney General, at least in the past, has been amenable to let it proceed,” said D’Angelo.

The state has 30 days to respond, she said.

Currently, 53 of the 65 homes on Lake Avenue, Stanton Road, Lincoln Terrace, Losee Court, and Gunnison Court have agreed to form the homeowners association, but city officials are hoping that the remaining 12 homeowners sign up, because the upgrades will be more costly and take longer if some residents opt out, Viggiano said.

“The more homes that join the association, the stronger the organization will be,” he said.

The city plans to break ground this spring and finish the work by the end of the year or early 2018, a spokesman said.

Source: http://www.brooklyndaily.com/stories/2017/5/bn-private-sheepshead-streets-homeowners-association-2017-01-27-bk.html

When it comes to filing condominium plans for new development projects in New York, Kramer Levin Naftalis & Frankel and Starr Associates continue to rule the roost, and in fact pulled even further ahead of rival law firms over the past year.

The Real Deal ranked the city’s top 15 law firms by the total value of new condo filings they prepared that were accepted by the New York State Attorney General’s office between Oct. 1, 2015 and Sept. 30, 2016.

Kramer Levin, whose real estate condo practice is co-headed by Jay Neveloff and Jonathan Canter, took the top spot in 2015, with seven projects valued at $7.3 billion, up 73 percent year-over-year. Starr Associates, whose condo practice is led by Allan Starr and Samantha Sheeber, came in second, with 20 projects valued at $5.1 billion, up 31 percent year-over-year.

In third place was Holland & Knight, whose condo practice is led by Stuart Saft. The firm had $1.9 billion in plans accepted, down about 7 percent year-over-year, while Seiden & Schein, led by Alvin Schein, had $1.5 billion in plans, up nearly 90 percent year-over-year.

Rounding out the top five was Schwartz Sladkus Reich Greenberg Atlas, a firm founded in 2015 by alumni of the real estate practice at Wolf Haldenstein Adler Freeman & Herz. Schwartz Sladkus, whose condo practice is led by Jeffrey Schwartz, had eight projects worth $609 million accepted over the past year.

The condo projects in this ranking, such as Extell Development’s One Manhattan Square and Related Companies’ 15 Hudson Yards, moved forward during a turbulent period in the high-end residential sales market, which saw softening demand and a softer international buyer pool.

One of the most ambitious projects in recent years, the $1.9 billion offering for the upper portion of the Sony Building at 550 Madison Avenue, was abandoned in April when Clipper Equity and the Chetrit Group decided to sell the building for $1.4 billion to the Olayan Group. The Saudi investment firm will continue to operate it as an office property.

Insiders said the slowdown on the high end has caused several changes, including a decline in land sales, and developers willing to put up condo buildings in more affordable neighborhoods, both in Manhattan and in the outer boroughs.

“The areas that are desirable for condo sales are expanding,” said Schein, citing a project on 4th Avenue in Brooklyn as a neighborhood new to their practice.

The current crop of projects, Saft said, are from acquisitions made years ago. That said, he believed the market was not as dire as some are saying.

“We really have more [projects] proceeding than we did a year ago,” Saft said.

The most active firm by number of filings was the Brooklyn law office of Jay Lichtman. His firm specializes in smaller projects, with most of them under $10 million, and did 37 projects with a total value of $368 million.

In addition to large and small law firms representing developers, there was one developer who used its own lawyer to file plans.

Francis Greenberger’s Time Equities relies on attorney Daniel Schwartzman to file its condo plans. It also came about in part because during the conversion boom, in the 1980s, some developers were converting dozens of buildings a year to cooperatives.

“I like being about to keep the business and the administration fully integrated with the legal,” Greenburger said.

Between Oct. 1, 2014 and Sept. 30, 2015, Stroock & Stroock & Lavan filed plans for $3.6 billion worth of projects, including Vornado Realty Trust’s 220 Central Park South. During that period, the firm placed third on the list, but dropped off the ranking this year, with no projects. Stroock has only submitted one project since late 2014, a relatively small one in Brooklyn.

But the firm’s hiring earlier this year of Erica Buckley, the former chief of the AG’s Real Estate Finance Bureau, will turn things around, said Ross Moskowitz, a partner at the firm.

“We have clients [who say], ‘We want to move now on the plan because you have Erica,” Moskowitz said.

Yet he said even before she was hired, Stroock was still gunning for deals.

“We all pitch everything,” Moskowitz said. “I am sure there was a deal we did not get. We don’t get every one.”

Source: https://therealdeal.com/2016/11/07/bar-tab-kramer-levin-starr-associates-extend-lead-in-nyc-condo-filings/

Renters across the city could soon become guinea pigs for landlords contemplating a condominium conversion.

A new memo from the New York Attorney General’s Real Estate Finance Bureau declares that landlords can now solicit interest and potential pricing for condo conversion projects at buildings which are currently occupied by renters, something they were previously barred from doing.

Developers could already submit so-called “test the market” applications for many condo conversion projects they weren’t yet sure they they wanted to pursue in earnest. Those applications, called CPS-1s, allow developers to distribute basic plans and pricing on a potential project in order to gauge demand. They could not, however, obtain something like a CPS-1 for buildings that were already occupied by renters—until now.

Under the new mechanism (called CPS-11), landlords can distribute these preliminary plans to both current tenants and outside buyers. Market-rate renters will be able to make reservation agreements for the right to buy their apartments once an official offering plan has been submitted for AG approval.

(Download the AG memo on TRData)

The AG’s move is likely to lead to a flurry of new “test the market” applications citywide, said Shaun Pappas, an attorney at Starr Associates, which has an extremely active condo offering plan practice.

“Because most of these rental buildings [that would be candidates for conversion] have a market-rate tenant base, there is a significant interest in the conversion process and creating sellable assets,” he said. Landlords pondering a rehab, he added, will be able to measure that interest before making the decision to transition the building to condos—a process that can take years.

Under the new rule, only current tenants in market-rate units will be allowed to reserve their apartments before an official offering plan is — outside buyers and rent-regulated tenants in the building are not given this option and rent-regulated units cannot be advertised. Excluding rent-regulated tenants from the rule is likely due to those tenants already having a 90-day first dibs period anyway, once the final plan is accepted, Pappas said.  Additionally, rent-regulated tenants are entitled to lease renewals, even if their landlord has moved forward with the conversion of market-rate units in the building, meaning their apartments cannot really be considered sellable in the first place.

But Pappas also mentioned that rent-regulated tenants are probably part of why landlords were never allowed to go condo-pamphleteering through the halls of their own buildings in the first place.

“I think because historically most rental buildings contained rent-regulated or stabilized tenants they [government] were wary of an uproar,” Pappas said. “Testing the market was historically frowned upon because it’s non-binding, and you’re stirring up a pot when you’re not necessarily planning on moving forward with it.”

Condo conversions of occupied rental buildings can lead to messy disputes. Two years ago, Macklowe Properties and CIM Group sued the former owner of 737 Park for allegedly not disclosing special lease agreements that allowed tenants at three occupied units to stay indefinitely. Despite these kinds of risks, condo conversions have become a top option for ambitious developers in a time where available development sites are scarce, even if it means dancing the tango with rent-regulated tenants. Typically, rent-regulated tenants have to be bought out when their landlord wants them out, although one does not have to look hard to see other “stir the pot” situations of a more nefarious persuasion.

Source: https://therealdeal.com/2016/02/11/dear-tenant-maybe-were-converting-to-condos/