From the concrete streets of metropolitan cities to the sprawling suburbs in most areas around the country, new construction is present in the form of townhouses, condominiums, single homes and the ever-so-popular “over-55 communities.”

While many of these properties are esthetically impressive complete with over-sized family rooms, open kitchen areas, and every upgrade/option imaginable, there are also the unfortunate, yet inevitable pitfalls associated with new construction such as delayed completion dates, cost overruns and building defects. With respect to the latter, buyers of new construction should be informed of their legal rights in the event that construction defects impede their use and enjoyment of the property.

Responsibilities of a Vendor
Traditionally, a vendor of property is responsible for the quality of the property sold only to the extent that the vendor expressly agrees to be responsible. In years past, the notion was that a seller and buyer dealt with one another at “arm’s length” and, therefore the buyer should only be afforded the specific protection for which he/she contracts. However, in the context of new construction, the laws started to change over the past few decades. In states such as the Commonwealth of Pennsylvania, a well-established body of case law has evolved that has afforded protection to buyers in the form of implied warranties.

The “implied warranty of habitability” and “implied warranty of reasonable construction” exist between a builder-vendor of new construction and a buyer regardless of whether any mention of such warranties is actually written into the contract of sale (those huge 25-plus page contracts that builders make you sign!). These warranties, which automatically exist between builder-vendors and buyers, represent that the property is suitable for living and is constructed with a reasonable level of skill and workmanship. Further, these warranties apply whether the buyer purchases the new home prior to, during or after completion of construction.

There is Legal Recourse on New Construction Properties
So, what does this mean for those of you who are about to purchase a plush, new townhouse on a golf course? It means that you may have legal recourse in the event that the builder has improperly constructed your home and/or constructed the home with defects that make the property unfit for living. Some examples of defects that could trigger these warranties and potentially provide you with a cause of action against the builder-vendor include: severe water leakage leading to mold growth, faulty plumbing, contaminated water supply, improper foundation and faulty landfill/site development.

Even though the courts in Pennsylvania (and some other states) have consistently found that these implied warranties afford buyers of new construction protection from faulty workmanship, BEWARE…a builder-vendor could attempt to disclaim such warranties in the contract of sale. The Pennsylvania courts have ruled that a builder-vendor CAN disclaim these implied warranties but the disclaimer language must be clear, unambiguous and set forth in the contract. This means that the builder-vendor will not get away with burying the disclaimer somewhere in that bible-sized contract of sale. However, if the disclaimer language is clear, easy to find in the contract, and easy to understand, then there is a good chance that a court would uphold the disclaimer. Under that circumstance, it would be unlikely that you would prevail in asserting a claim that the builder breached one or both of these warranties. For this very reason, it is your absolute responsibility to thoroughly read your contract of sale (or at least hire a highly skilled real estate attorney to read through it for you!!). The last thing that a judge wants to hear is that you didn’t realize the builder-vendor disclaimed the implied warranties because you failed to read your contract of sale.

So, here is a little recap:

1. Builders of new construction have an obligation to make sure the property is built in a reasonable, workmanlike manner and fit for living.
2. The implied warranties of habitability and reasonable construction protect buyers regardless of the warranty provisions in the contract of sale.
3. A builder can disclaim these warranties by using clear, unambiguous language in the contract.
4. All buyers should thoroughly read through the contract of sale.
5. If your new home has significant defects and is unfit for you to live in, then you should consult an attorney to see if you have valid claims against the builder.

You are now ready to go looking for that beautiful new home…just remember, if your house has major defects, don’t back down from that big, bad builder—the law looks to protect buyers of new construction and you need to pursue all of your legal remedies!!

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Tags: , , , builders, construction, estate, homes, law, New, new construction, real, Real Estate Law

The 2007 Real Estate Goals Group Writing Project continues on this holiday weekend. As expected, we’ve had a bit of a slowdown in submissions, but the project continues.

Congrats to:

• Chris Cranny for putting together his Biggerpockets Goals

Make sure you take a look at all of the goal submissions that we’ve already gotten!

Just as a reminder, we’re giving away prizes to random participants, including (more to come):

• 100 business cards, valued at $25.
• A signed copy of the book, The Real Truth about Real Estate Investing valued at $30.00
• A Free Rehab Project Planning CD valued at $49.95.
• $60 worth of electronic product online, including 1) The Spill Zone (e-book), Author Ed Ross 2) Audio electronic “Navigating the Market Series” (40 minutes) and 3. An assortment of Bonus Gifts.
• A free Video Podcast & Set Up Fee from MLPodcast.Com, valued at $79.90.

Tags: 2007, bigger, biggerpockets, chris, contest, cranny, estate, goal, New, pockets, real, resolutions, writing, years

The goals are really starting to come in now! After consulting with some friends online, I’ve decided to extend the deadline for our 2007 Real Estate Goals Group Writing Project until Friday, January 5th.

Today’s submissions include:

• Real Estate Goals ‘07 - Group Writing Project by Sonya aka AroundTheWorld
• Real Estate Goals For 2007 by Monica Villasenor
• Real Estate Goal Group Writing Project for 2007 by Derek Burress
• REI Newbie, Goals for 2007 by Mike Martone

Visit our complete list of submissions!

Again, thanks to all of the contest sponsors for their support (new sponsors keep arriving!):

• Jeff Byer of Print Fellas for donating 100 business cards, valued at $25.
• James Klobasa for donating his ebook Residual Income Through Real Estate, valued at $27.
• Michael Mulrooney for donating a signed copy of his book, The Real Truth about Real Estate Investing valued at $30.00 .
• “Roni” M. Wilcox for donating a Free Rehab Project Planning CD valued at $49.95.
• Mike Schendel for donating $60 worth of electronic product online, including 1) The Spill Zone (e-book), Author Ed Ross 2) Audio electronic “Navigating the Market Series” (40 minutes) and 3. An assortment of Bonus Gifts.
• Michael Price for tossing in a free Video Podcast & Set Up Fee from MLPodcast.Com, valued at $79.90.

If you’re interested in donating to the contest, please contact me at josh (a)(t) biggerpockets.com

Tags: 2007, biggerpockets, estate, goals, group, New, project, real, resolutions, writing, years

The much-awaited Wall Street bonus news have come out last week, with Goldman Sachs announcing the highest annual earnings in Wall Street history, allowing the investment bank to pay out a whopping $16 billion to eligible employees. That is over $600,000 per employee, with some high producers possibly earning as much as $100 million.  Other investment banks did very well also; Morgan Stanley said that it will pay its CEO John Mack $40 million in 2006, also a Wall Street record for a CEO.

Doing naked cart wheels are, of course, people who work at Goldman, and real estate brokers.  Salivating at the prospect of money that will be thrown into real estate, Pam Liebman, the CEO of Corcoran, a large NY real estate brokerage, said, “When these guys learn what their bonuses are, we are among the first people they call…. They call their mothers, and then their real estate brokers.” (The NY Times, December 13, 2006)

For people like me who have been waiting for prices to fall even further, this is not good news.  The real estate appraisal firm Miller Samuels has produced a correlation chart between Wall Street bonuses and real estate prices in Manhattan, and surprise, surprise, they are inextricably linked!

Brokers are already reporting brisk sales in as early as November (“Bonus Season’s Greetings,” New York Magazine, December 4, 2006).  A friend who is a broker confirms that the past two months have been “very, very busy” for her.

While the rest of the country is languishing in a so-called “real estate freeze,” New York defies that trend and sends its property prices through the roof once again, beyond reach of the likes of us, who did not earn those bonuses.

Tags: bonuses, earnings, estate, Goldman, Morgan, New, real, Sachs, Stanley, Street, trends, Wall, York

An article in the Sunday issue of the New York Times (“A House Divided:  Uncivil War on E. 73^rd Street,” December 10, 2006) describes a dispute between a landlord and an unhappy tenant in a tony Upper East Side brownstone of New York City.  A battle like that is always a case of someone’s word against the other, but if you read through the article, it becomes easier to decipher who is in the wrong, so to speak. 

Mr. Pavia, the landlord, rented out some floors of his luxurious brownstone to several tenants.  Along came Mr. Couri the tenant.  Mr. Couri started to have problems with a longtime tenant, a gay designer, who lived above him, complaining of noises, music, and partying.  He sent the designer letters citing “lies… late p.m. homosexual escapades,” and threatened to disgrace him by writing to interior design agencies and magazines.

The designer, who never had problems with other tenants or Mr. Pavia before, moves out.  Mr. Pavia eventually sued Mr. Couri for obnoxious and harassing behavior, and Mr. Couri countersued by saying that his landlord refused to disclose the rent-stabilized status of the building.

The article, however, mentions that Mr. Couri, who dresses impeccably in a 3-piece suit, has a history of suing people (nearly 150 times since 1972).  He also has pleaded guilty in the past of defrauding a bank.  If Mr. Pavia had done a background check on him, the problems might have been prevented.

We’ve also had some issues with tenants.  Years ago, when my husband was looking to rent out his apartment, a friend of his who worked in theater introduced to him a young man who was an actor.  I even met the guy; he was good-looking, personable, a little jittery maybe, but seemed like a nice guy.  But jittery was the part we should have focused on.  He turned out to be a crack addict.  Luckily, his family stepped in and moved him out so we didn’t have to begin eviction proceedings.

Unless you personally know the potential tenant well, a background check on a potential tenant should be performed.  A check on credit history and from a tenant-screening agency can be done easily and should be done even when a tenant comes with a referral, as ours did.  For more information, check out on what landlords should know from the FTC.

Tags: biggerpockets, city, dispute, East, landlords, New, renter, Side, tenants, Upper, York

When I discuss with friends about buying real estate in Manhattan, and specifically about why my husband and I have not been able to find anything for years, I always blame him (out of his earshot, of course). He happens to be one of those people who want a perfect home, and we all know that “perfect” doesn’t exist. There’s always a little compromise here and there, but most buyers end up with a home that they love, after some renovation or what not. But he is unbending in his quest. Another problem he has, when looking, is that he’s always looking to buy something for nothing. In other words, if the property is listed at $1 million, he only wants to pay $500K. And another problem he has is…. Wait, I could go on forever!

But I have to admit that I, too, have little fixations that do not help. I’m a big proponent of Feng Shui, the Chinese art of interior design and placement which theorizes that the layout of a home can influence your life. It really does make sense: a layout of a home can give it a certain energy that will affect your chi over a period of time.

There are many schools of thought in Feng Shui, but the basic premise is that different spaces and corners of your home represent different areas in your life, such as love/marriage, money, friends/helpful people, career, education, and so on. If certain corners are missing from your home (if you have an L- or T-shaped home, for example), those parts of your life can be seriously affected. That’s why the first thing I do when searching for apartments in New York is to ask the broker to send me the floor plans. I then obsessively screen for “whole” apartments: no corners missing, front door in the right place, bathrooms situated in the right place, and so on. My favorites are apartments that are completely square or rectangular. Sounds simple enough, but surprisingly hard to find in Manhattan.

By the time I’m finished with my Feng Shui screening, about 95% of the listings are tossed out. Whatever I end up with, I show to my husband, who as previously mentioned, has his own real estate pathologies. Should anyone be surprised that we haven’t yet purchased our dream home?

Tags: apartments, chinese, design, estate, feng, interior, manhattan, New, real, shui, York

The million dollar question is, is it true that there is a glut of new constructions in New York City? When the word “glut” is used, it conjures up the image of empty apartment buildings with no takers, which is pretty extreme. But is there some truth to it?

Take 15 Central Park West, for example, a building that is going up right now near the Time Warner Center. There are rumors of many famous buyers there, including Sting, Denzel Washington, Google founders Larry Page and Sergey Brin, and the list goes on. I know of a real estate broker who represented a buyer who bought a 3-bedroom there for $6 million pre-construction and flipped it for $8 million. A $2 million profit without even seeing the apartment to its completion, that’s pretty good. 15 CPW is a glittering success by all standards, and it has a lot going for it: a Central Park West address, proximity to another high profile recent construction (Time Warner Center), which also houses Whole Foods, the organic food mecca beloved by many affluent New Yorkers.

Well, on the East Side, there is 995 Fifth Avenue, at the former Stanhope Hotel. You can hardly get more prestigious than Fifth Ave., and it’s across from the Metropolitan Museum of Art on 81^st Street. I had no idea that it was not doing well until I read an article in the New York Times (“A Candela with a Storied Past, but Few Takers,” November 19, 2006). The apartments are apparently not selling at all for a variety of reasons (high monthly maintenance, bad views for the middle floors, among others). But the developers, Extell, are hoping to reintroduce the building this winter. I’m curious to see how they will market and package it differently. Will they, for example, re-price the apartments?

Incidentally, Extell is also developing the property 151 East 85^th Street, a convenient location we happen to like. My husband is excited about the fact that Extell has so much unsold inventory at the Stanhope, hoping that it may try to “dump” the apartments at 151 E. 85^th St. at ridiculous prices. That is truly wishful thinking, but who knows? The prices there have not been made public yet, as far as I know, but I will be keeping an eye on this property.

There really are tons of new constructions in the city right now, and there are plenty of rumors of price drops and negotiations, formerly unheard of when buying into new buildings. Take the 3 BR at 170 East End Avenue priced at $5.395 million; it was $6 million a few months back. There are whispers that apartments are not selling there, and that deals can be made. I don’t know if there is a true glut, but with these rumors and news of disappointing sales, things are selling slowly, at least in some buildings. If only the prices will fall drastically, and fast.

Tags: constructions, glut, New, York