NEW ROCHELLE, NY — The new owners of a 24-story tower in New Rochelle said they have a good reason to be suffering from buyer’s remorse in a new lawsuit.
Khosla Capital, which recently announced that it had paid $200 million for the Halstead Station tower in New Rochelle, claims in a court filing that the seller of the property intentionally hid issues with the building’s parking garage that will cost millions to repair.
The new owners said it wasn’t until after the deal closed that they learned they had been duped in the multi-million dollar deal in a complaint filed in Westchester Supreme Court in February. The firm is now suing Massachusetts-based DSF Multi-family Real Estate Fund for fraud and breach of contract.
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The group told the court they first started to suspect they had been seriously misled when they received a notice from the City of New Rochelle about violations predating the sale of the property related to condition of the garage. This, despite the fact, Khosla’s attorneys say, there was an agreement that DSF would disclose any governmental notices of property violations and provide access to all records about the property, except for appraisals.
Rather than living up to these agreements, the lawsuit argues that the sellers instead made a concerted effort to hide any potentially damaging documents from the buyers.
“Shockingly, Jessica T. Agostino informed Raman Khosla, Manager of Plaintiffs, that she had been instructed by Ryan Ball, Vice President of Investments of DSF Advisors, LLC, not to disclose any reports, including, but not limited to, the Condition Report, to Plaintiffs prior to the Closing,” lawyers for the building’s new owner contend in the lawsuit.
One of those damaging documents was a “condition appraisal” report for the property’s more than 400-space parking garage.
The tower’s new owners said they now know what the seller knew at the time of closing — that it will cost $2.77 million, plus any fines assessed by the city, to make the needed repairs to the garage. $330,947.00 will need to be spent on immediate concerns, according to the firm. Over the next six months to a year, another half million dollars will be needed for “moderate repairs” and nearly $2 million more will be needed for comprehensive repairs over the next three to five years.
The lawsuit argues that the building’s new owners have been damaged by the seller’s ” intentional deception.” They contend that not only does the garage contain “latent defects” that the seller knew about and “deliberately and intentionally did not disclose,” but that the garage was not built in a good and workmanlike manner, was in violation of building codes and the building was not worth the purchase price paid.
The suit accuses the previous owners of fraudulent inducement, fraudulent concealment and fraudulent misrepresentations.
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