Condo Offering Plan Disclaimers Unenforceable With Respect to Facts Only Within Sponsor’s Knowledge

On September 29, 2022, Justice Chan of the New York County Commercial Division issued a decision in Board of Mgrs. of 87-89 Leonard St. Condominium v. Leonard St. Owner, LLC, 2022 NY Slip Op. 33275(U), holding that condo offering plan disclaimers are not enforceable with respect to facts only within the sponsor’s knowledge, explaining:

Here, plaintiff alleges that Sponsor knowingly made affirmative, material misrepresentations in the Offering Plan intending to solicit buyers, who relying on the statements, purchased the units and suffered damages. . . . The moving defendants . . . argue that plaintiff fails to plead reasonable reliance since the unit owners expressly disclaimed reliance in the Offering Plan and purchase agreements. Under New York law, however, a buyer’s disclaimer of reliance cannot preclude a claim of justifiable reliance on the seller’s misrepresentations or omissions unless the alleged misrepresentations or omissions did not concern facts peculiarly within the seller’s knowledge. Here, the disclaimers do not preclude reliance because the alleged defects concern covered ·up exterior defects and interior defects in the mechanical equipment, plumbing equipment, and electrical system, which are sufficient to raise the question as to whether these defective conditions are peculiarly within the Sponsor’s knowledge and could not be discovered by unit owners through ordinary inspection.

(Internal citations omitted) (emphasis added).