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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