Condo Square Footage Dispute Settled for $150K

Lawyer Rishi Bhandari 110 Livingston StIn New York City's cramped housing market, where closets pass for studio apartments, every square foot counts. So when Brooklyn, N.Y., homeowners Rishi and Heather Bhandari discovered that their brand new condominium unit was built nearly 20 percent smaller than promised, they fought back.

After a nearly four-year-long dispute over a 109-square-foot discrepancy, the couple agreed to settle with luxury developer Two Trees Management for $150,000. The couple refused, however, an additional $20,000 to stay quiet about the terms of the settlement.

"It's not right," Rishi Bhandari, pictured above, told AOL Real Estate. Bhandari, who is also a lawyer, represented the couple in the dispute. "They knew they were lying. If we had walked away, the next buyer would have been deceived by the same floor plans."

Find out after the jump how to prevent a bait and switch on your next condo purchase.

The Bhandaris purchased the two-bedroom condo for $795,000 at 110 Livingston, the former headquarters of the New York City Board of Education. According to their complaint, the apartment was still in the pre-construction stage when they signed the purchase agreement, and they were forced to rely on the developer's measurements.

But when the couple first saw the finished unit, they quickly determined that something was amiss.

"It looked smaller. Way smaller," said Bhandari. By their measurements, the living space was 17.8 percent smaller, to be exact. But it's not uncommon for homebuyers to be shocked by a major discrepancy in how their home is represented, and what the home actually feels like.

What to Look Out For

"What we saw at the tail end of the boom was properties being represented as far larger than common sense would suggest," said Jonathan Miller, president of New York appraisal firm Miller Samuel, during a phone interview. This is especially true in the condo market, he said, where larger square footage makes an apartment seem more affordable.

Intentional misrepresentation aside, the problem also lies in the myriad ways square footage is measured, and the multiple parties involved in the transaction.

"The only way you're ever going to know is to have someone physically measure it," said Paul Isolda, a Fairfield, Conn., appraiser. In the case of condos, it's generally the architect that measures the property, he said, but their method often includes space that's not usable to the owner, like exterior hallways and thick dividing walls.

Furthermore, real estate agents typically don't measure the apartments, he added. Instead, they rely on what's disclosed in the condominium offering plan.

"There are so many homeowners that don't realize that they didn't get the size unit they thought they were getting," he said.

Look Before You Leap

Before rushing headlong into litigation, home buyers should be aware of the hurdles ahead, even if there is a noticeable difference in square footage.

Jerry Feeney, a New York residential real estate lawyer, recently defended a seller in a case of contested square footage--and won. Because, while discrepancies in size can, and often do, occur, finding a specific party at fault can prove difficult.

In my case, "the seller never made any representation of size," Feeney told AOL Real Estate. "Their brokers might have -- but should the buyer go after the broker? Probably not, because the broker goes by the offering plan," which always discloses the method of measurement.

Even if the methodology outlined in the offering plan seems unfair to the buyer, the fact that it's disclosed at the outset makes proving misrepresentation that much harder.

The Bhandaris' case, he said, is different because they bought the home on plans and specs during the pre-construction phase. "In my case, the buyer had been in the house 15 times."

Pull Out the Tape Measure

With the countless ways square footage is sliced, diced and cooked on a daily basis, condo buyers would do well to take Isolda's advice and hire their own appraiser. Physically measuring the home is the one and only way to decide whether the methodology outlined in the offering plan is accurate.

There is a silver lining for buyers, though, particularly in recently remodeled or converted apartments. In New York, a law known as the Martin Act, grants the state attorney general the power to force a condo developer to revise their offering plan if it's proven to be deceptive.

Thanks to the Bhandaris' complaint, the offering plan was redone, and all prospective buyers who had yet to close at the time were given the option to back out of their contracts.

As for the Bhandaris, they never moved into the condo unit. In late March, Two Trees paid back the couple's deposit with interest, totaling $81,077, and the additional $150,000 to terminate the contract.

For more on home appraisals and inspections, watch our homebuyer videos:
Inside the Mind of an Appraiser
Home Inspections: It Pays To Know What You're Buying

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