I’m in contract to buy an Upper East Side co-op with a wood-burning fireplace that I just discovered can’t be used. I found this out independent of my attorney—who only reviewed 10 months of board minutes. The seller didn’t disclose that shareholders have to pay $20,000 to have the chimneys lined or be required to remove them. Do I have to pay?
Your rights between contract and closing will depend on the wording of the contract, our experts say. This is why it is important you find the right attorney who is thorough in their due diligence before you go into contract.
“Sellers often include a term in the contract which states that buyers are not excused from their obligations to close if there are any increases in maintenance or assessments,” says attorney Hal Coopersmith, a partner at Coopersmith & Coopersmith.
Your rights will be outlined in the contract
If the language in the contract makes it clear it is the buyer’s responsibility to independently verify assessments and maintenance increases, which would include costs associated with fireplace remediation, you will not be able to get out of the contract. In these situations, as a buyer, you accept the risk that costs may change over time.
However, in some contracts the seller states maintenance and assessments will be a certain amount. “Buyers under these contracts may have a claim that the seller has made a material misrepresentation, particularly if there is any evidence the seller knew about the potential assessment,” Coopersmith says.
Keep in mind, these types of issues often lead to litigation—because neither party wants to lose the deposit—so you will need to decide if that’s a path you want to take. If you believe your attorney bears some responsibility, you should carefully review any agreement you entered into with the law firm.
Wood-burning fireplaces are being phased out
Although wood-burning fireplaces are an attractive selling point in a prewar building, the city is phasing them out as part of a clean-air initiative. They have been banned in new construction since 2014. “Just a handful of buildings are able to use them, and under specific conditions,” says Anna Karp, CEO and co-founder of renovation firm, Bolster (a Brick Underground sponsor).
According to the Environmental Protection Agency, drafts from wood-burning fireplaces can pull warm air up the chimney, making them one of the least efficient heating methods. The agency also claims fireplaces do not burn as cleanly as EPA-certified wood heaters, creating 20 times the amount of air pollution.
If the appeal of a fireplace are its crackling logs, there are alternatives including gas and ventless fireplaces. Keep in mind, with energy-efficiency a priority for boards needing to comply with the city’s emission rules under Local Law 97, you may find your building pivoting away from fossil fuels in favor of low-emission electric heating and cooling.
Karp says that a $20,000 price tag for renovating a fireplace does not seem unrealistic. However, she adds: “Each project is different and the cost to get these fireplaces working and compliant will depend on the actual work to be done as both the flue and the lining are refurbished on a floor by floor basis.”
Finding the right closing attorney
To avoid these issues in the future, once your offer is accepted, you want to make sure your closing attorney reviews at least two years of the co-op’s financial statements. Coopersmith typically reviews about three years of financials and minutes for a co-op purchase. “If we see an issue or can’t have a question answered we will generally ask for longer,” he says.
A broker who is familiar with the building is also an asset when you buy because they will likely know some of the pre-existing issues in the building.
When you’re looking for the right closing attorney, Coopersmith suggests asking how they conduct the due diligence and seeing if you can review their retainer agreement. This will give you an idea of the law firm’s work product.
You might also want to ask how the closing process will work and how the firm handles data security. “These should be good examples of how the law firm operates,” Coopersmith says.