Real estate broker not liable if representations are not accurate.

Mr. and Mrs. Khatchadourian were seeking to purchase a large apartment with a view on the East Side of Manhattan, and they approached America Realty Mortgage Corp., the exclusive sales agent for a new building at 100 United Nations Plaza. The broker showed the prospective purchasers apartments on the 18th and 20th floors, as well as a number of other apartments in the building, but they were all rejected by the Khatchadourians because the views were not to their liking.

Eventually the broker showed the Khatchadourians two adjoining apartments on the 38th floor with spectacular views, which the Khatchadourians liked very much. However, when Mr. Khatchadourian stepped onto a balcony and looked down, he saw that another building was under construction next door. He asked the broker whether the new building would obstruct the view from the apartments they were considering buying.

The broker explained that the new building was to be the German Embassy building, which was going to be about 23 floors tall and would reach a height up to about the 28th to the 30th floor of 100 UN Plaza. The prospective purchasers were also informed that the broker also did work for the developer of the Embassy building and had knowledge that the developer had acquired the air rights over the Embassy building in order to limit the height of the building. The broker stated that the Embassy would not block the view from the apartments.

The purchasers retained counsel to negotiate the terms of the contacts of sale of both apartments and later concluded the purchase of both units. Both contracts provided that the purchasers were acquiring both apartments in their "as is" condition, without relying on any representation made by any broker or by the seller or anyone acting on behalf of seller as to any matters which might influence or effect the decision to purchase the units. The contracts contained no representation or warranty as to the view from the apartments or the height of the Embassy building.

When the Embassy was completed, although it did contain 23 floors as the broker stated, it was actually much taller because it was an office building in which the floors are taller than those found in residential buildings. Although the Embassy building did not reach as high as the Khatchadourian's 38th floor, some views were partially blocked. There would have been no problem had the Embassy building been three stories shorter.

The Khatchadourians sued the broker for fraud, negligent misrepresentation, and breach of warranty. The broker made a motion before Judge Herman Cahn of the Supreme Court, New York County to dismiss all causes of action ia the Khatchadourians' complaint, and Judge Cahn granted the broker's motion it its entirety.

Judge Cahn stated that first of all, the claims should be dismissed because they are barred by the clear language of the contracts, which specifically disclaim any responsibility for statements not contained in the written contracts of sale. The contracts conclusively bar the purchasers from claiming reliance on statements made by the broker. Even though the broker was not party to the contacts of sale, the Court ruled that the contact clauses made specific reference the broker's representations, and thus, these barring provisions of the contract inure to the broker's benefit.

Secondly, the purchasers could not prove a claim for fraud or misrepresentation because an essential element of such claims is that there was a misrepresentation of an existing material fact. This essential element could not be proved in this case. The representation of the broker that the view would not be blocked by the Embassy building is not one of an existing fact. Rather, it is a non-actionable predication of a future event. Furthermore, what constitutes an impairment of a panoramic view is not a factual matter, but rather only a subjective opinion. In addiction, the purchasers could not show that the brokers's statements were false. After all, the Embassy building did not exceed 23 stories, and it did not reach beyond 30 stories of 100 UN Plaza, as the broker said.

Finally, the Judge ruled the purchasers' claims must be dismissed for the reason that purchasers could not show that they relied on the broker's representation. In order to prove fraud or misrepresentation, the claimant must show that there was reasonable reliance on the statements made. Where the claimant had knowledge of the true facts, or where the claimant had constructive notice of the true facts and could have found the true facts out, there can be no reasonable reliance on those statements of the broker.

In this case, the purchasers were placed on notice that a new building was going up next door, because they could see the actual construction. The purchasers were also provided with the name and other information regarding the developer of the Embassy building. Thus, they had the same access to information regarding the future building as the broker did, and further, the plans for the building were publicly available. Under the circumstances, the purchasers could not have reasonably relied on the broker's statements about how their view would be impacted by the Embassy building.

For all of the foregoing reasons, Judge Cahn dismissed the case.

While the contracts of sale barred any claim against the broker for the representations made, the fact that the brokers' representations were factually true made it easier for the Court to dismiss the purchasers complaint. (Khatchadourian V. American Realty Mortgage Corp. NYLJ 9/15/99 Pg 26 Col 9).

(Edward L. Schiff is a real estate partner at the New York law firm of Hartman and Craven LLP.)