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Jessica Rothman in the New York Real Estate Journal: Courts limit personal liability of sponsor/developer

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There have been many lawsuits filed by purchasers of residential condominium units in New York City against sponsor-developers and contractors. Generally, the sponsor-developer is an entity—a Limited Liability Company or “LLC”—and, for the most part, New York law does not allow such claims to be brought against the individual members of the LLC in accordance with the general rule of law that prohibits holding individual members of an LLC liable for the legal obligations of the LLC.

Of course, there are certain limited exceptions. And until recently, New York trial courts in Brooklyn held that the individual members of the sponsor LLC of a newly-constructed condominium may be personally liable for construction defects where those individuals signed the required certification that is included in the condominium offering plan in their representative capacities on behalf of the sponsor-developer of the condominium.

But, in May, the Appellate Division, Second Department, which is the appellate court in Brooklyn, that also covers Queens, Staten Island, Long Island, Westchester and Duchess, Putnam, Orange and Rockland counties, reversed the trial court’s order and dismissed the complaint by the Board of Managers of the 125 North 10th Condominium against the managing member of the sponsor-developer and several principals of the sponsor LLC...

CLICK HERE TO READ FULL ARTICLE IN THE NYREJ