Where cooperative housing corporations and condominium associations have attempted to assert third-party beneficiary rights to enforce performance or warranty rights under construction and design contracts between developers and contractors, architects and engineers, results have been inconsistent. These results have left co-op and condominium entities with inadequate remedies, especially if the developer becomes insolvent or has inadequate resources to correct construction defects. With the increasing number of new construction condominium offerings, this issue will become a more prevalent problem, as evidenced by two appellate decisions last year, which refused to recognize third-party rights concerning alleged condominium construction defects.
This column addresses limitations on the assertion of rights by third-party beneficiaries and discusses the two 2001 decisions that curtailed the remedies of the condominium entities. Some recommendations are offered on how co-op and condominium boards can be protected and provided the option to bring claims directly against the responsible contractors, architects and engineers.
