NY court ruling makes it easier for condo boards to sue investors for construction defects

The Appellate Division of the New York state court upheld a ruling last week that makes it easier for condo boards suing over construction defects to recoup money that investors earned from the project.

The court ruled that a condominium board does not have to prove a fiduciary or confidential relationship between itself and the building’s sponsor when suing over construction defects. The decision reverses a 2013 ruling that a condo board needed to prove a connection to investors to recoup funds from them for shoddy construction.

A lawyer working for the condo board involved in the case said investors can now be liable for shoddy construction, so they must be extremely cautious about the quality of the developers with whom they work. Another lawyer cited in an article by The Real Deal questioned whether this case would have such a sweeping impact, though.

It may be that courts interpret the case more narrowly due to specific language in the offering plan of the development.