There's a condo unit in my building that I know for certain has illegal additions. It's on the market for a ton of money, being sold by a recognized real estate broker. The unit is being marketed as something that it's not. Should I report this and to whom? What are the consequences for misrepresenting a listing?
You have no legal responsibility to report this—the duty here is with the buyer and seller, as well as the condo board, our experts say.
"If the owner knows that the additions are illegal, then that is one issue. If the board is aware of it, it is another issue," says Deanna Kory, a broker with Corcoran. "Boards typically require that every renovation is done with board approval and NYC Department of buildings approval."
If you are confident you have information about the unit that your condo board does not, you should let them know, at which point they may choose to halt the sale.
"Depending on the terms of the condominium by-laws, the board may even take the position that it will not consider any waiver applications, which are necessary for the sale of a condominium, until the unauthorized alterations have either been removed or legalized," says lawyer Jeffrey Reich, a partner at Schwartz Sladkus Reich Greenberg Atlas.
Beyond the board, there are several other parties involved in an apartment sale who are responsible for making sure that there will be no unpleasant surprises.
"The duty here is on the buyer's and seller's counsels. The buyer should know what they're buying, and the broker should tell them if there is an issue, but you have no inherent duty to be the broker police," says Dean Roberts, an attorney with Norris McLaughlin.
If the buyer's attorney does their due diligence, then they should come across any illegal additions or major misrepresentations of the unit, and if the seller fails to address these problems, the deal is likely to fall apart.
As for the broker, it's possible they're unaware that there is anything illegal about the apartment.
"New York is a 'buyer beware' state, and sellers of condominium units are not obligated to discuss issues with their units to purchasers," Reich says. "However, they may not actively conceal any issues or provide false information to purchasers. So unless the agent has knowledge of the misrepresentation, there are likely no consequences to publishing the listing."
On other hand, if the agent does have knowledge about the misrepresentation, they risk having their license revoked by the state. You could report the condo listing to them, but you'll be required to prove wrongdoing on the agent's part.
"The softer approach would be to call the manager of the agent’s company and have a discussion about it, but it seems to me that the owner may be the one who is first and foremost culpable," Kory says.
And a buyer who discovers they've been misled about their new apartment after the sale goes through may have a fraud claim. Of course, it's preferable to clear up any issues beforehand, which is why buyers should carefully vet their brokers and attorneys and hire seasoned professionals they trust.
"After closing, depending on what the contract language says, a lot of times you're done, absent real fraud," Roberts says. "Most contracts have a certain finality to them."
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