By Bill Morris in Legal/Financial For Habitat Magazine
Construction defects are nothing new to the buyers of New York City condominiums. What is new is that New York State recently revised its century-old rules on what’s known as fraudulent conveyance. The new Uniform Voidable Transactions Act, which went into effect on April 4, 2020, has just produced its first court ruling — and it’s good news for condo boards and unit-owners battling to recoup the cost of fixing construction defects.
In the recent decision, Justice Andrea Masley of the Commercial Division of New York State Supreme Court ruled that the sponsor of the condo conversion at 11 Beach St. in Tribeca must set aside $1.1 million — what’s known as a “pre-judgment attachment” — to satisfy any future awards to the condo board in an ongoing lawsuit over defects in the renovation work. The 11-story building was built in 1900 as offices, and the sponsor, HFZ Capital Group, began the condo conversion in 2014, with prices starting at $5.3 million.
“This decision was very good for us,” says Jeffrey Schwartz, a partner at the law firm Schwartz Sladkus Reich Greenberg Atlas, which is representing the condo board in the ongoing litigation. “Our clients still have to show that they’re entitled to the money, but the purpose of the pre-judgment attachment is to preserve a share of the proceeds from the sale of apartment 3-B. If the sponsor had been allowed to get rid of that apartment, that would have resulted in us not having any money to pursue. That asset would have been gone.”