Case Study

Adam Leitman Bailey P.C. Appellate Victory: Successor Sponsors No Longer Responsible for Repairing Building

Adam Leitman Bailey P.C. successfully defends purchasers of units in a condominium following the original sponsor’s  bankruptcy against claims of individual units owners for breach of contract

The original sponsor of a condominium conversion declared bankruptcy after it was sued by individual unit owners for design and construction defects. In the bankruptcy proceeding,  the firm’s client purchased almost 40 unsold units and unsold parking spaces  “free and clear” of the defective pre-bankruptcy design and construction defects of the original sponsor. The original sponsor was discharged in bankruptcy. The client was required to file an amendment to the Offering Plan and did so noting that it would only be responsible for certain “punch list” items in the units it purchased.  The board seized upon the language of the amendment to argue that the new sponsor should be held liable for the construction defects caused by the original sponsor. Before the lower court, and thereafter, the Appellate Division, the firm successfully argued that its client, who purchased “free and clear” of the defects caused by the original bankrupt sponsor could, and was required under law to file an amendment to the Offering Plan with respect to the units it sought to sell could not be held liable. The firm demonstrated that any other result would violate the law and would have an extremely chilling effect on any entity which chose to be a purchaser in bankruptcy.

The client was represented by attorneys Adam Leitman Bailey and Jeffrey Metz.

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