Real Estate in Manhattan, whether in a pandemic or not, remains a very significant economic force. Real estate transactions remain a very significant portion of the legal malpractice world in NYC. Here, a multi-million dollar co-op purchase went sour over the next door building’s right to add several floors and a penthouse. The addition would render the co-op basically valueless and force a large swath of rooms to be unusable as residential space.
Halperin v Van Dam 2020 NY Slip Op 31301(U) April 28, 2020 Supreme Court, New York County Docket Number: Index No. 652124/2019 Judge: Andrea Masley explains why the attorneys remain in the case. it is, in large part, because they sent out a questionnaire and then ignored the missing answers.
“Prior to March 2017, plaintiffs Steven Halperin and Jamie Berman Halperin sought to purchase a multi-bedroom cooperative apartment in New York City to accommodate their young child and planned additional children. (NYSCEF Doc. No. [NYSCEF) 12, Complaint at 1Mf 11, 14.) Plaintiffs engaged defendant Marshall, “a licensed Real Estate Broker and principal officer or agent of [defendant) Douglas Elliman.” (Id at 1] 12.) Steven Halperin had previously worked with Marshall in leasing and selling another NYC apartment. (Id) Pursuant to a Dual Agency Disclosure prepared and furnished by Marshall, on behalf of Douglas Elliman, Marshall expressly acted as a “Buyers Broker” for plaintiffs. (Id at 1] 13.)
As their broker, Marshall provided plaintiffs with one of Douglas Elliman’s brokerage listings (Brokerage Listing) for an apartment located in the Flatiron District of Manhattan at 32 West 20th Street, Apartment 8S (Apartment). (Id at 1]1] 1, 12.) The Brokerage Listing represented the Apartment as “[c)urrently configured with one bedroom … additional bedrooms and baths may be added to fit your own lifestyle.” (Id at 1] 12 [emphasis omitted].) The Elliman Defendants knew that plaintiffs required a multi-bedroom apartment and actively marketed the Apartment as suitable for alteration and renovation into a multi-bedroom apartment. (Id at~ 14.) The Elli man Defendants also assured plaintiffs that such renovations were lawful and consistent with the governing rules and would be authorized by defendant Thirty-Two West 20 th Street Inc. (Apartment Corporation) (Id at W 4, 14.)
Plaintiffs engaged in negotiations with the Sellers. (Id at~~ 1, 15.) Although Sellers allegedly authorized Douglas Elliman to market the Apartment as a one bedroom with ability to expand, they failed to mention during negotiations that in 2010 the NYC Landmarks and Preservation Commission approved the premises adjacent to the Apartment for the construction of two additional levels and a penthouse, which would completely block certain windows in the Apartment. (Id at~~ 15, 27.) Plaintiffs decided to purchase the Apartment and retained the HH Defendants as attorneys to handle the closing of the transaction. (Id at W 18, 4.) The HH Defendants utilized a form of questionnaire entitled “Coop/Condo Review Sheet” and requested specific information from the Apartment Corporation concerning the Apartment. (Id at~ 19.) Questions 21 and 22 of this questionnaire were “Is this a lot-line Unit?” and if so, “Which of the windows are affected?” (Id) Although the questionnaire was returned to the HH Defendants, questions 21 and 22 were not answered. (Id at~ 20.)
Nevertheless, the HH Defendants made no further inquiry and failed to communicate this omission or its significance to plaintiffs. (Id)”
“To sustain a cause of action for legal malpractice, [plaintiff] must show that [the attorney] failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that [the attorney’s] breach of this duty proximately caused the client to sustain actual and ascertainable damages.” (Brookwood Cos., Inc. v Alston & Bird LLP, 146 AD3d 662, 666 [1st Dept 2017] [internal quotation marks and citation omitted].) Failing to advise a client on the risks associated with a transaction and failing to confirm relevant information may form the basis of a legal malpractice claim. (See Benitez v United Homes of N. Y., LLC, 142 AD3d 867, 867 [1st Dept 2016].)
Here, plaintiffs allege that the HH Defendants failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession by failing to advise plaintiffs that rooms containing lot-line windows could not be utilized as bedrooms for residential occupancy. (NYSCEF 1, Complaint at 1[ 33[a]- [b].) Additionally, they allege that the HH Defendants failed to exercise ordinary reasonable skill and knowledge by failing to observe or report that the Managing Agent on behalf of the Apartment Corporation left blank the portion of the “Coop/Condo Review Sheet” that inquired “Is this a lot-line unit?” and “Which of the windows are affected.” (Id at 33[d].) Plaintiffs also allege that these breaches proximately caused them to sustain actual and ascertainable damages in the amount of $5,000,000. (Id at 1[ 36.)
Although the HH Defendants submit a a diagram of the premises that plaintiffs received prior to signing the Contract of Sale, indicating the presence of lot-line windows, this submission does not utterly refute the legal malpractice claim. (NYSCEF 29, Heermance affirmation~ 7; NYSCEF 34, Diagram.) Here, “on a pre-answer motion to dismiss,” “the information contained in the [diagram] cannot, at this stage, be described as explicitly putting plaintiff on notice and not requiring counsel’s interpretation of the information.” (Macquarie Capital [USA] Inc. v Morrison & Foerster LLP, 157 AD3d 456, 457 [1st Dept 2018].) The HH Defendants “may not shift to the client the legal responsibility [they were] specifically hired to undertake.” (Id. [internal quotation marks and citation omitted].) Additionally, the HH Defendants’ submission of an email from Steven Halperin allegedly about the “Coop/Condo Review Sheet” also does not utterly refute the malpractice claim. (NYSCEF 38, 4/12/2019 email, 2.) To the contrary, Steven Halperin states, “If … Marc confirms that he is comfortable with the answers in the questionnaire (I have read them and they seem fine to me), we should be clear to execute the agreement … ” ( /d.) Accordingly, the HH Defendants’ motion to dismiss the second cause of action on these grounds is denied.”