Daily Development for Tuesday, November 15, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

VENDOR/PURCHASER; DISCLOSURE; STATUTORY REQUIREMENT:  Exclusion of condominiums and cooperatives from the definition of “residential real property” in the property disclosure statutes violates the Equal Protection Clause. 

Goldman v. Fay, 797 N.Y.S.2d 731 (N.Y.City Civ.Ct. 2005). 

The purchaser of a condominium discovered faulty air conditioning pipes and sued the seller of the property, stating that seller knew of the condition when it sold the condominium to purchaser.  The property disclosure statutes of New York require that a Property Condition Disclosure form be completed prior to entering into a contract for the sale of residential real property.  The law, however,  explicitly excludes the sale of condominiums and cooperatives from the definition of “residential real property”. 

The court stated that the exclusion of condominiums and cooperatives from the definition of residential real property violates the Equal Protection Clause of the U.S. Constitution.  It called upon the New York legislature “to either repeal the current law or stay its execution until the defects can be remedied [by adding a disclosure requirement for condominiums and cooperatives.]

The court acknowledged that one reason for the distinction might be that the information concerning the character of the property called for in the report might be less available to sellers of condominium or cooperative apartments than they would be to owners of free standing homes, because repair and maintenance of an apartment unit typically is the responsibility of an association or manager, and not the owner of the unit.  .  The judge characterized this argument as a “red herring,” at least with respect to the unit itself, as opposed to the common areas.  The judge took the view that the burden of filling out the form would not be onerous, and would provide valuable information to the buyer.

The court acknowledged that there was no statutory disclosure required here, so the common law rule requiring disclosure of known latent defects applied.  The court concluded that the purchaser was not entitled to damages because it could not prove that the seller had actual or constructive knowledge of the faulty air conditioning pipes.  Even if the purchaser could prove that the seller had knowledge, the purchaser could not recover the expenses of repairing the faulty air conditioning since the repairs were done by an unlicensed home improvement contractor.

Comment 1: This is just a trial court opinion, apparently, but it is rather extreme in its position, so the editor thought it worth noting.  It is unlikely to be appealed because the court found as a matter of fact that there was no liability for nondisclosure.

Comment 2: It strikes the editor as rather bizarre that there would be no “rational basis” for a statute that imposes disclosure responsibilities on owners of free standing houses but not on owners of cooperatives or condominiums.  And certainly there are not such protected interests at stake here that any more rigorous test would apply.  It’s a provocative thought, though.

Comment 3: Much of the required information on the New York form strikes the editor as requiring quite a bit of inquiry on the part of an apartment dweller, and in fact disclosure would require more effort and uncertainty than would be the case with a homeowner.  The editor doesn’t see what the big deal is.  But the editor is no judge, and therefore doesn’t get to sprinkle his writing, as the court did here, to quotes from “Little Orphan Annie” and “The King and I.” 

Readers are encouraged to respond to or criticize this posting.

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