Court Upholds Pleading Of Board Of Managers’ Claim That Sponsor Violated Deceptive Practices Statutes
We have previously reported on cases rejecting claims brought by dissatisfied purchasers of condominium units or boards acting on their behalf, asserting that the sponsor or others involved in the sale process violated Sections 349 and 350 of the General Business Law (“GBL”). These sections are New York State consumer-protection statutes that protect consumers against deceptive acts and practices and false advertising. Most decisions have reasoned that these statutes are intended to apply only in situations where a deceptive practice has an impact on consumers at large, and that claims limited to a single condominium building do not qualify.
The Supreme Court, Kings County decision in Board of Managers of 550 Grand St. Condominium v. Schlegel LLC, 2014 N.Y. Slip Op. 50576(U) (Sup. Ct. Kings Co. Apr. 4, 2014), holds to the contrary. In this case, the court sustained a board of managers’ pleading, on behalf of the unit owners, of GBL §§ 349 and 350 claims against the sponsor predicated on allegedly deceptive practices in the advertisement and sale of condominium units. Reviewing prior precedent, the court observed that the Appellate Division for the Second Department, which includes Kings County (as well as Queens, Staten Island, and several suburban counties), has treated the advertising and sale of residential apartments as a consumer-oriented transaction for purposes of the GBL, even though the First Department (Manhattan and the Bronx) has held to the contrary. Here, the sponsor furnished any member of the public who expressed interest in purchasing one of the seven units in the building with a copy of the allegedly deceptive offering plan. This was sufficient, in this court’s view, for the board to assert a claim on the unit purchasers’ behalf under GBL §§ 349 and 350.