Brokerage Not Liable for Listing Altered Apartment
reprinted courtesy N.A.R. legal affairs site 3/8/08
A New York court has considered whether a brokerage could be liable for not
informing buyers that an apartment had been altered in a manner that did not
conform with local zoning laws.
Cynthia Rawley (“Seller”) listed her condominium apartment for sale with
Dorothy Zeidman (“Broker”) of The Corcoran Group (“Brokerage”). The Seller had
converted the apartment from a one-bedroom into a three-bedroom unit in 1998.
However, the New York City Building Code limited the apartment’s use to a
one-bedroom unit because the two smaller rooms did not have windows facing the
street or a legal courtyard.
The Brokerage marketed the property as a three-bedroom unit. The Broker
testified that she marketed the property in this way based on information she
had received from the Seller and also based on her inspection of the property.
The Brokerage claims that it did not have any knowledge prior to the
transaction that the apartment had been converted into a three-bedroom.
Revital Roman Joseph and Valery Yoshopov (collectively, “Buyers”) purchased the
property in 2005. The Buyers were represented by a licensee (“Buyers’
Representative”) associated with the Brokerage. Following the acceptance of the
offer but prior to the signing of the purchase agreement, the Broker sent the
Buyers’ attorney the original condominium “offering plan” documents which
described the apartment as a one-bedroom apartment. The Broker also sent the
unit’s “certificate of occupancy”, which described the permissible use of the
apartment as one room “Class A” apartment. The Buyers visited the apartment a
number of times prior to closing.
The Buyers filed a lawsuit against the Brokerage, Buyers’ Representative,
Broker, and the Seller, alleging fraud and negligent misrepresentation. The
Brokerage, Buyers’ Representative, and the Broker filed a motion with the trial
court seeking judgment in their favor.
The Civil Court, City of New York, dismissed the Buyers’ lawsuit against the
Broker, Buyers’ Representative, and the Brokerage. In order to allege fraud, a
party must demonstrate “a misrepresentation or material omission of a fact
which was false and known to be false by the defendant, made for the purpose of
inducing the other party to rely upon it, justifiable reliance of the other
party on the misrepresentation or material omission, and injury”. However, a party cannot claim a misrepresentation if the
alleged misrepresented facts were not exclusively in possession of the
defendants and the truth could have been discovered by the other party.
In this case, the Buyers received, through their attorney, both the original
offering plan for the apartment and the certificate of occupancy, each
demonstrating that the apartment had originally been used as a one bedroom
apartment. Therefore, the Buyers had as much information about the prior
configuration of the apartment as the Broker and Brokerage. Since this
information was not solely within the possession of the Broker and Brokerage,
the court dismissed the fraud allegation.
The court also dismissed the negligent misrepresentation allegations against
the Broker and Brokerage. A party making such allegations must demonstrate that
they “justifiably relied” upon the alleged misrepresentation. As set forth
above, the Buyers had received information from the Broker and the Brokerage
about the apartment’s prior configuration. Therefore, the court dismissed these
allegations as well.
Joseph v. NRT, Inc., No. 300402TS06, 2007 WL 3407745 (N.Y. City
Civ. Ct. Nov. 9, 2007). [This is a citation to a Westlaw document. Westlaw is a
subscription, online legal research service. If an official reporter citation
should become available for this case, the citation will be updated to reflect
this information].
reprinted courtesy N.A.R. legal affairs site 3/8/08
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