Caveat Emptor: It’s the Buyer’s Job to Discover Defects

Alteration agreements exist for a reason. They protect co-op and condo boards – and other residents of the building – when someone modifies, renovates or combines apartments. Ideally, the agreements establish the scope of the work and ensure that it includes necessary permits and insurance and an enforceable timeline. But even the best alteration agreements are not foolproof. 

The buyer of a Brooklyn condo learned this recently. After moving in, she discovered that the previous owner had made numerous renovations that may have been illegal – and unknown to the condo board. How does the buyer legalize the work? And who is liable if the sale is deemed fraudulent – the seller, or the buyer’s lawyer?

“The buyer has a duty to investigate their purchase,” Lorraine Nadel, a Manhattan real estate lawyer, tells the Ask Real Estate column in the New York Times. In New York State, a seller is not required to disclose anything negative about the property; it’s up to the buyer to find out this information through due diligence. A seller cannot intentionally conceal problems, but if the seller does nothing to hide a defect and the buyer fails to find it, then it’s the buyer’s problem once the property is sold. 

Every buyer of a co-op or condo apartment should review the contract of sale. Did the seller state that all renovations were legal and the board had been informed? If the seller said that work was done properly when it wasn’t, then the buyer may be able to sue for misrepresentation. 

During the attorney review process, the buyer’s lawyer should review board minutes, check with the managing agent, and visit the website of the city’s Department of Buildings to see if the apartment had any open permits. If the previous owner did not file any permits and never informed management about the work, there would be nothing for the lawyer to find. In that scenario, says attorney Pierre Debbas, a partner at Romer Debbas, “the current owner inherits the issue and not the one who actually did the work.” Could the buyer sue her own lawyer? “Potentially,” Debbas says, “but it would be difficult, as the lawyer can only rely on the information available.” 

That’s why these two words of advice have been around a few thousand years: buyer, beware.