This article discusses the rise in lawsuits alleging shoddy construction in luxury residential projects built during the real estate boom. As condo boards take over from developers, homeowners are finding problems like unfinished work, water leaks, and poor insulation. Experts say when the market was booming, developers rushed projects and cut corners on quality. High-profile lawsuits have been filed against developers of luxury buildings alleging issues like leaks, mold, and improper fire safety systems. Construction experts say developers took on more projects than contractors could properly handle, resulting in oversight by inexperienced teams and compromised quality and safety standards.

1. Wednesday, February 17, 2010
BrokersWeekly
THE R ESIDENTI AL MA R K ETPL ACE Vol. 2, No. 47
THIS WEEK
Boom time’s
New chapter
Michele Kleier finds time
to write a novel — and
sell at the Stanhope.
Page 2
Monster move
dark cloud
Rental Beast aims to
take a bite out of NYC
market.
Page 4
The M&A man
Rush to raise luxury
condos leads to spike in
lawsuits for shoddy work
Hybrid broker David
Ogden finds success
as an all-rounder. ... Page 17
Page 7
Getting it right LOW
BLOW
Experts say w
e’ve hit
bottom — and
we’re
going to stay
there.
... Page 6
Price, size and location
all going for the new
Graceland Court.
Page 9
Putting dream
Golfers tempted by
chance to play free on
Nicklaus course. Page 15
Absolutely Cleaning up
fabulous Developer
Gerard Longo
Elizabeth Sahlam
sells out the
says life in
swanky Pearline
Lenox Hill
Soap Factory.
is perfect.
Page 2
Page 8

2. Brokers Weekly Wednesday, February 17, 2010 n 7 Brokers Weekly Wednesday, February 17, 2010 n 17
David Ogden, vice president,
PROFILE Mark David & Company
COVER STORY
Boom time’s dark cloud
Hybrid broker
By John MaJeski solution.
Home sweet … headache? It is unclear how busy the AG’s office has
Attorneys and industry insiders say the number been handling shoddy construction matters as of
of lawsuits alleging shoddy construction in luxury late. They did not return calls seeking comment.
residential projects has spiralled, with complaints rang- Saft said the AG’s office gets involved, but
thrives on
ing from unfinished roofs, to water leaks, to failing to often does not have enough manpower. Another
install proper insulation. issue is that many disagreements tend to focus
As projects that began during the building boom on aesthetics and quality of work, and the spon-
are completed and condo boards are taking over from sor is only required to provide what is in the
the sponsor, some home buyers are finding that they offering plan and to adhere to local construction
mergers and
are unhappy customers. Steven Sladkus, a partner at codes and practices.
the firm Wolf Haldenstein, said many boards are filing “It’s very hard for the AG to get involved in
lawsuits now because they are approaching New York saying what something looks like,” Saft said.
state law’s 3-year statute of limitations for negligence Blanca Lofts, a boutique project on the
claims against sponsors and contractors. Upper East Side where streeteasy.com says a
Although he couldn’t address specific lawsuits, penthouse is currently in contract for $5.375
aquisitions
Sladkus said he is currently handling over a dozen mat- million, has had its share of allegations. They
ters claiming design and construction problems and he started last year when an insurance firm that
expects many more complaints to arise over the next paid out a flooding claim to a penthouse owner
said they should be reimbursed because the
W
damage was the result of negligence on the part
e’re hitting a time where it’s of the developer Joseph Cayre and his builder,
following the housing Alcon. Several months later, a couple that spent
$4 million for two units sued after they said
market boom … and when the they encountered mold and flooding problems.
market was great, people were And in December, the condo board (represented
by Sladkus) brought a $10 million suit against
throwing up these buildings and Cayre and the CORE Group for alleged negli-
cutting corners. gence and fraud.
— Steven SladkuS Other lawsuits have caught the attention of
the media. It was reported last year the condo
board for the swanky Slate Condominiums
year or more. in Chelsea — where recorded sales averaged
“We’re hitting a time where it’s following the hous- $1,310 psf, according to streeteasy.com — filed
ing market boom … and when the market was great, suit against the sponsor for a host of alleged
people were throwing up these buildings and cutting problems, including warped floors, leaks and
By Jason TurcoTTe action came to fruition by “accident.” A fellow flight what separates me from other agents is my ability to corners,” Sladkus said. improper fire-suppression measures.
When other brokers run for the hills during tough attendant he worked with said she needed help finding take care of them, to help them,” Ogden said. Stuart Saft, an attorney with Dewey & LeBoeuf and Frances Katzen, executive vice president at subcontractor teams were going to produce less than
times, Mark David & Company vice president David an apartment. Knowing the modest salaries flight at- Another ally has been social media. Ogden said chairman for the Council of New York Cooperatives Prudential Douglas Elliman, said she has heard stories satisfactory work products,” LePatner said.
Ogden has the skills to survive the toughest of mar- tendants earn, Ogden said, “I was very judgmental and sites like Twitter and Facebook have played an and Condominiums, said the jump in grievances is about leaking hot tubs on penthouse floors that caused As a result, quality and safety have been sacri-
kets. didn’t think she had the money. I told her I didn’t have integral part in his transitions between residential and nothing new. Officials have seen this following other damage to floors below, flooring that buckles because ficed in some instances, LePatner said. Will devel-
Truly a “hybrid” agent, Ogden’s repertoire includes anything in Queens.” commercial — and back to residential. He said the booms, including in 2002 and in the early ‘90s. it wasn’t treated prior to installation and walls put up opers take away some kind of message from this?
rentals, residential sales and commercial deals — in- Ogden, who began his career handling rentals at sites are a great way of alerting your contacts to the “It occurs because there are never enough construc- without insulation. LePatner doubts so.
cluding multifamily and mixed-use sales. Mark David, had his eyes on building a broader re- market and niche you’re most focused on. And work- tion crews to do all of the work when the market really “I think as people get less loans, maybe sponsors are “They don’t learn from these mistakes,” he said.
And with Ogden’s career background, juggling an sume. ing within a small boutique firm that he says feels heats up. At the same time of the limited construction not as able to finish at the same pinnacle (of quality) as “They just move from job to job. They are not ac-
eclectic mix of skills has proved second nature to the “Believe it or not, I wasn’t interested in residential like family, meant his transitions have been met with crews, you also have with the contraction of the market they like,” Katzen said. countable. The developers are the ones who allowed
SoHo standout. sales as much as I was interested in commercial sales,” nothing but support. a situation where the banks become more restrictive for She said while individual owners and condo boards inferior construction to occur.”
Before hitting the real estate scene in 2003, when Ogden said. “My passion was commercial.” “I’m starting to really embrace and enjoy residen- advancing money, or construction loans run out,” he may want to sue the sponsor, they also realize that a
So when the firm tial. There are some amazing properties out here,” said. “Developers find themselves in a position where case can hurt a building’s reputation, negatively impact-
I n 2009, I woke up. A lot of my friends in commercial launched a commercial Ogden said. “We have such a diverse market.” they have to complete construction as quickly as pos- ing sales. News of a rise in lawsuits throughout the
division a few years ago, Building on the momentum of last June’s sales up- sible.” industry also may give iffy buyers just
were being downsized or leaving the business, but Ogden — who was ulti- tick, Ogden is most active these days in SoHo and its Indeed, New York City is coming off some construc- another reason to stand on the side-
I had residential to fall back on and I was grateful for mately named a team lead- surrounding neighborhoods. He pens a blog (ogden- tion-heavy years. According to the city’s Department of lines for now.
er at Mark David, training groupny.blogspot.com) devoted to the dynamic area, Housing Preservation and Development, 2007 marked “It affects consumer confi-
that. other agents — jumped on which is also home to the Mark David office. the third year in a row that permits were awarded for dence ultimately,” Katzen said.
the opportunity. He sold He believes market conditions have improved more than 30,000 housing units of privately owned Construction attorney and
townhouses, multifamily because brokers are no longer promising their clients residential construction. Such an explosion in permit- author Barry LePatner, who has
he joined Mark David, Ogden worked as a restaurant/ properties and mixed-use buildings. pie-in-the-sky prices and products are hitting the ting had never before been achieved, according to the long called out the industry on
nightclub waiter, a flight attendant and a professional His commercial activity remained busy throughout market at more realistic price points than they were city. its shortcomings, said the jump
dancer. 2008 until Lehman Brothers collapsed. That’s when one year ago. Saft said the recent growth in allegations is “not in such lawsuits is no surprise
He partly took the flight attendant position because clients, including a Spanish investor set to acquire two Working with first-time buyers and some reloca- tremendous,” but it will increase as the year goes on because builders took on more
it was based in New York (and also because it afforded commercial properties, sat on the sidelines. tion clients, Ogden recently closed on a Ft. Greene as there are still so many buildings that have yet to be work than they could handle
him the opportunity to see the world). Ever since the The Lehman collapse not only sent ripples through sale and has just secured a number of new listings. completed. Once condo boards are installed, it can take prior to the downturn. Big-time
age of 12, the Chicago native knew he’d find his way the real estate industry, but also had Ogden — who has With buzz in the housing sector returning, he’s hope- them some time to bring on their own engineers and projects ended up being overseen
to the Big Apple. closed more than $20 million worth of sales and 400 ful for a productive year ahead. architects to get a sense of what the issues are. by C- and D-level construction
“I always wanted to be in New York,” said Ogden, rental transactions — re-thinking the market he would “I’m optimistic that it should be a strong year — Saft said oftentimes it is not the developer’s fault but teams, he said.
who amusedly admits that watching Hollywood mov- focus on. certainly not 2006 and 2005 levels, but hopefully we that of the contractors or sub-contractors. Of course, “There were many
ies based in New York spurred his fascination with “In 2009, I woke up,” Ogden said. “A lot of my can build on the momentum,” said Ogden, ranked not all complaints are legitimate. instances where this
coming here. “I felt like Chicago was such a secondary friends in commercial were being downsized or leaving as one of Mark David & Company’s top produc- “There’s no doubt that there are buyers who are business knew that
city.” the business, but I had residential to fall back on and I ers. “There are a lot of buyers still on the sidelines trying to take advantage of the (current down market),” there were going
But one thing he did appreciate about Chicago was was grateful for that.” waiting for the bottom to fall. I still have a relation- Saft said. to be large prob-
the city’s sleek, modern architecture — an element Ogden — who closed his first sale at a co-op in ship with them and I’m waiting for them to pull the Since litigation can be costly and drag on for years, lems arising out
he feels piqued his curiosity for real estate and urban Murray Hill — is no stranger to tough markets. When trigger.” Saft said condo boards or individual owners try to of the fact that
markets. Relocating to New York, he was floored by he started in 2003, sales were hard to come by and the A self-professed “foodie” who spends his free first work it out with the sponsor so that repairs can be inexperienced
the fact agents here were actually tapped for the rental residential sector was just beginning to turnaround. But time playing golf, traveling and volunteering with a made. Failing that, the second step would be to go to construction
market and could earn generous commissions for he credits the skills learned in hospitality for helping youth mentoring program, Ogden lives in the East the state Attorney General’s office for mediation. The teams with
apartment hunting. Ogden said his first rental trans- him build a strong base of referral business. “I find Village. agency oversees condo offering plans and may offer a inexperienced Lawyers Stuart Saft and Barry Le Patner.