Crain’s Business: Boulevard East Condominium
- Posted on: Apr 11 2011
Crain’s Business: Marc Held, Partner at Held & Hines, LLP quoted Re: Boulevard East Condominium
Buyers turn up heat on condo developer Allege Brooklyn Bridge Boulevard took out mortgage on apartment in 99-unit Boulevard East in downtown Brooklyn and pocketed proceeds; follows complaints of faulty construction.
By Amanda Fung Published: April 11, 2011 – 1:45 pm
The board of Boulevard East, the new downtown Brooklyn condominium, is accusing the project’s developer, Brooklyn Bridge Boulevard, of wrongfully taking out a $500,000 mortgage on the superintendent’s apartment in the building, according to a recent lawsuit filed by the board. The legal action follows earlier accusations against the developer alleging structural defects in the 99-unit building. According to the lawsuit filed in the Supreme Court of the State of New York County of Kings, the sponsor of Boulevard East received a mortgage from City & Suburban Federal Savings Bank for half a million dollars that was securitized against the building’s superintendent’s apartment in 2005. The lawsuit says that the sponsor “committed fraud in obtaining said mortgage” and “that due to the fraud and breach of terms of the purchase agreement by the defendants, the purchase money note agreements between the defendant sponsor and plaintiff should be revoked and terminated.” The condo board claims that they were unaware of this mortgage and that it was not taken in their best interest. The plaintiffs are seeking $570,000 in compensatory damages, the lawsuit said. Additionally, proceeds of that mortgage went directly to the sponsor, not to the unit owners, even though the loan was securitized against the super’s apartment, according to documents reviewed by Marc Held of law firm Lazarowitz & Manganillo, an attorney who represents the condo board in the suit.
Mario Procida, the sponsor of Boulevard East, acknowledged the mortgage, but said: “There was no fraud. Everything we have done is in accordance with the offering plan of the building.” He also noted that the mortgage was taken out to help finance the sale of the super’s unit to the condo board. “We are hopeful that this will get resolved.” Condo board members have their doubts on that. “Developers can’t use projects as their personal piggy banks,” said Mr. Held. “They must be held accountable for their ability to disclose this mortgage to people who purchase in this building and subsequent board members who took over Boulevard East.” Mr. Held noted that the mortgage in question is now due and that is how the condo board learned of it. If the sponsor doesn’t pay for the mortgage, the bank could foreclose on the unit in the building. The fraudulent loan claim is part of a broader lawsuit which accuses the sponsor of Boulevard East of construction defects, and the condo board is seeking $5 million in compensatory damages to pay for the repairs needed on the 11-story building, located at 53 Boerum Place, because of the faulty construction, according to the lawsuit. “We are trying to come up with a plan to address the issues that are our responsibility, relative to the construction defects,” said Mr. Procida, adding that he met with the plaintiff’s engineer. “We are hopeful this will all get resolved.” ——————————————————————————– Entire contents ©2011 Crain Communications Inc.