Defendants Cantor and Pecorella, Inc. (Cantor) and Nina Falk (Falk, together referred to as the "Selling Agent Defendants") move to dismiss the complaint as against them in this action by purchasers of two condominium units in an apartment building, now known as the Downtown Club Condominium, located at 20 West Street in Manhattan (Building). By separate motion, defendant Starr Assocates, LLP (Starr) also moves to dismiss the complaint as against it. The complaint alleges that the moving defendants are liable under theories of fraud and negligent misrepresentation. The motions are granted for the reasons below.

Plaintiffs John Pappas and Lois M. McNally (Buyers) are a married couple who were in the market to purchase an apartment. In November 2005, Cantor was a real estate broker that employed Falk as a real estate agent. The Buyers spoke to Falk about the availability of apartments in the Building, which once housed the Downtown Athletic Club. The Building was undergoing a conversion to a residential condominium. The condominium sponsor was defendant New 19 West, LLC (Sponsor), which had engaged Cantor for two purposes. First, to provide an opinion regarding how common element interests were allocated among units pursuant to Real Property Law Section 339-i, and as its selling agent to market the units for sale. Sponsor also engaged Starr as its attorney to provide an opinion letter to be included with the condominium offering plan, as required under the regulations of the New York State Department of Law.

The Buyers allege that they told Falk that they wanted a unit with outdoor space. Falk showed them two adjacent apartments, Units 39-B and 39-C. Unit 39-C is located next to a setback in the roof, and it has a door that opens to the setback. Falk allegedly told Buyers that the Sponsor intended to legalize the setback and make it usable as a private terrace for the owner of Unit 39-C (see Amended Complaint, paragraph 60), and assured Buyers that they would be able to use the roof space as their "exclusive outdoor space" (id, paragraph 63). Falk provided Buyers with a price comparison of Units 39-A and 39-C with Units 40-B and 40-C, one floor above, which stated that Units 39-B and 39-C were "w/out outdoor space", and that Units 40-B and 40-C were "w/outdoor space" (see Amended Complaint, paragraph 64).^[FN1] The price for Unit 39-C was substantially greater, and Falk [*2]allegedly told Buyers that this is because 39-C included a terrace which could be used as exclusive outdoor recreational space. Buyers further allege that she provided them with a floor plan of what Units 39-B and 39-C would look like if combined; it did not include an indication that they might not be able to use the setback.

Before purchasing, Buyers' lawyer received a copy of the condominium offering plan from the Sponsor. The lawyer told Buyers that he carefully reviewed the document prior to the closing (Amended Complaint, paragraphs 288, 295). The offering plan has a section titled "Special Risks", which includes the following:

37. (a) Certain Residential Units are adjacent to roof setbacks ("Roof Setbacks") as shown on the Floor Plans . . . Such Roof Setbacks are not legal Terraces because they are not accessible to the Units by doors, due to historic preservation and other restrictions imposed by the New York City Landmarks Preservation Commission ("LPC") and/or the New York City Department of Buildings in connection with approval of the plans for Sponsor's renovation of the Property. Applicable Law prohibits the Owners of Units with adjacent Roof Setbacks from installing doors in the exterior walls of such Units and from using the Roof Setbacks as Terraces in any manner, . . . All Roof Setbacks are General Common Elements of the Condominium.

(Offering Plan, Affidavit of Michael C. Becker, Esq., at Ex. B)

A "Terrace" is defined in the "Definitions" section of the Offering Plan as any terrace, balcony or garden which is appurtenant to a residential unit. The Offering Plan stated that all terraces and roof set backs adjacent to apartments would be paved with concrete pavers, even for those roof setbacks that are not accessible (Offering Plan, Ex. B, at 173). Schedule A to the Offering Plan is a table that provides a general description of each unit, including area, offering price and percentage of common interest. In provides a column titled "Approx. Exterior Sq. Ft Terrace", which is blank for all but eight units, suggesting very few units had appurtenant outdoor space. The entry for Unit 39-C indicates no outdoor space.

The floor plan annexed to the Offering Plan labels the roof area next to 39-C as a "Roof Setback", and specifically states that "ROOF SETBACK IS NOT A LEGAL TERRACE. SEE OFFERING PLAN FOR DETAILS." The floor plan also suggests that the layout of the units in the "C" line, from floors 39 through 45, are essentially identical, except that Unit 39-C has an exterior setback. The Offering Plan allocates to Unit 39-C a greater percentage of the common interest than the "C" units above it (the allocation varies from unit to unit), and Unit 39-C cost more than any of those units. According to Schedule A to the Offering Plan, Unit [*3]30-B was priced at $825,000, and Unit 39-C was priced at $850,000.

Attached to the Offering Plan was a letter from Cantor to the Sponsor (Cantor Opinion Letter), stating that in its opinion, based upon its experience with new construction luxury condominium projects, the allocation of common interests was made in accordance with Real Property Law (RPL) Section 339-i(1)(ii) (see, Becker Aff. Ex. B, 83). 13 NYCRR Section 20.3, a regulation promulgated by the New York State Department of Law, governs the format of a condominium offering plan. Section 20.3(i) requires the sponsor to include a statement of the method selected pursuant to RPL 339-i and the factual basis used to calculate the percentage of common interest in the condominium. RPL Section 339-i(1) is part of the Condominium Act, and provides that

Each unit shall appurtenant thereto a common interest as expressed in the declaration. Such interest shall be (i) in the approximate proportion that the fair value of the unit at the date of the declaration bears to the then aggregate value of all the units or (ii) in the approximate proportion that the floor area of the unit at the date of declaration bears to the then aggregate floor area of all the units, but such proportion shall reflect the substantially exclusive advantages enjoyed by one or more but not all units in a part or parts of the common elements.

The Cantor Opinion Letter states that based upon its review of the Offering Plan and Schedule A to it, that the method used to determine the common interest of each unit in the common elements is based upon the approximate proportion of the floor area of the unit to the aggregate floor area of all units, but such proportion reflecting the advantages enjoyed by one or more units, but not by all. It does not specify what "advantages" are enjoyed by any particular unit.

The Offering Plan also included an opinion letter from Starr (Starr Opinion Letter). The Starr Opinion Letter states that the opinion is provided as required under 13 NYCRR Section 20.3(y)(5). That regulation requires the sponsor to include an opinion of counsel in the offering plan. Allan Starr, who is a partner in the Starr law firm, opined that the allocation of common interests shown on Schedule A of the Offering Plan was made in accordance with RPL Section 339-i(1)(ii). The sole factual basis for this opinion is said to be Starr's review of Schedule A and the Cantor Opinion Letter.

On January 26, 2006, Buyers entered into contracts with the Sponsor to purchase Units 39-B and 39-C, with the intention to combine them. The contract price for Unit 39-B was $675,000, and the price for Unit 39-C was $700,000. The contracts provided that: [*4]

Purchaser acknowledges that Purchaser has not relied upon any . . . representations, warranties, statements or estimates of any nature whatsoever, whether written or oral, made by Sponsor, Selling Agent or otherwise, including, but not limited to, any relating to the description or physical condition of the Property, the Building or the Unit, or the size or the dimensions of the Unit or the rooms therein contained or any other physical characteristic thereof, . . . the estimated Common Charges allocable to the Unit, . . . or any other data, except as herein or in the Plan specifically represented.

(Contracts, Becker Aff., Ex. C, at paragraph 20). The contracts do not contain any representation that the Sponsor will legalize the roof setbacks. Before the closing, however, Buyers submitted a "punch list" of work which they wanted Sponsor to perform before the closing, which included the installation of paving stones on the roof outside Unit 39-C and railing around the roof setback parapet. This work was not done before the closing on May 26, 2006, but after the closing, the Sponsor installed pavers on the roof surface and put in rails around the parapet and separating the roof space outside Unit 39-C from the adjacent unit. But the roof setback has not been legalized as a terrace for Buyer's exclusive use, and it remains off limits to them.

Buyers commenced this lawsuit in December 2006.^[FN2] The second through fifth causes of action are against Cantor. Buyers allege that Cantor, through Falk, fraudulently misrepresented that they would have exclusive use of the roof setback, and thereby induced them to purchase not only Unit 39-C, but also Unit 39-B because Buyers made clear their desire to combine the units and have the use of outdoor space. Buyers further allege that Cantor negligently represented that the roof setback would be available for Buyers to use as their exclusive outdoor space. Finally, they allege that Cantor falsely certified that it had complied with Real Property Law (RPL) Section 339-i(1)(ii), and that Buyers relied upon the false certification. Buyers contend that the proportionate share of interest in the common elements allocated to Unit 39-C exceeds its proportionate floor area, as evidenced by the lower interests allocated to other apartments in the "C" line in floors 40-45. Therefore, Buyers were lead to believe that the greater allocation was attributable to the "substantially exclusive advantage" presented by the outdoor space.

The eighth through tenth causes of action are alleged as against Falk individually, and mirror the claims against Cantor for fraud and negligence, with the exception of the claim based [*5]on Cantor's Opinion Letter. The fifth and sixth causes of action allege that Starr is liable for fraud and negligent misrepresentation based upon the content of the Starr Opinion Letter.

The Selling Agent Defendants argue that to the extent that Buyers allege fraud claims arising from misleading statements in the offering plan, such as the statements contained in the Cantor Opinion Letter, it must be dismissed because under the Martin Act (General Business Law Article 23-A), the Attorney General of the State of New York has exclusive standing to vindicate the rights of persons claiming to have been damaged by false or misleading statements contained in a condominium offering plan. The Appellate Division, First Department, has recently held that the Martin Act does not preclude a private party from prosecuting an otherwise valid common-law fraud claim in connection with the sales of securities, even if the Attorney General also would be authorized to bring suit (Kramer v W10Z/515 Real Estate Limited Partnership, 44 AD3d 457 [1st Dept 2007]). Accordingly, Buyer's fraud claims are not barred by the Martin Act.

The fraud claims are dismissed, however, because the Offering Plan accurately described what Buyers were purchasing. The Offering Plan plainly states that the roof setbacks are not terraces, that they are common elements, and that owners of adjacent units are prohibited from using them as terraces in any manner. The floor plans in Schedule A to the Offering Plan label the roof setbacks accordingly, and the floor plan for Unit 39-C specifically states that the roof setback is not a legal terrace.

Moreover, the complaint alleges that Falk told them that the Sponsor intended to legalize the roof setback for use as a terrace, which pre-supposes the Buyer's knowledge that it was not legalized when it was shown to them. Buyer's alleged reliance on Falk's statements was not reasonable where the statements were contradicted by the terms of the Offering Plan. Nothing in the contracts they subsequently signed obligate the Sponsor to convey to them an interest in exclusive use of the roof area. When they signed the contracts, Buyers represented that they did not rely upon any representations made by the selling agent or Sponsor, apart from those contained in the Offering Plan and contracts. Therefore, the claims based upon Falk's alleged misrepresentations are dismissed.

With respect to Buyers' claim for fraud based on the Cantor Opinion Letter, that too is dismissed. The crux of the complaint against the Selling Agent Defendants is that Buyers wanted to acquire a unit with the right to the exclusive use of outdoor space, and they did not get it. The Cantor Opinion Letter generally states that the allocation of common interest was in [*6]accordance with RPL 339-i(1)(ii), i.e., that interests were allocated proportionately based on floor area, except that some units would be allocated a greater interest based upon an advantage over other units. This statement would not lead a reasonable purchaser to conclude that Unit 39-C comes with the exclusive right to use the roof area, where the specific representations in the Offering Plan regarding a unit owner's right to use the roof setback flatly contradict that supposition. The submissions on this motion do not reveal what "advantage" enjoyed by Unit 39-C justified its allocation of a greater interest in the common elements. Indeed, this may partly explain why Buyers purchased the unit at a substantial discount to the offering price.

Buyers' negligent misrepresentation claim also must be dismissed. "Negligent misrepresentation occurs when there is (1) an awareness by the maker of an untrue statement that it is to be used for a particular purpose, (2) reliance upon a known party on that statement for a particular purpose, and (3) some conduct linking it to the relying party and evincing its understanding of that reliance" (Kimmel v Schaeffer, 224 AD2d 217, 218 [1st Dept 1996]). The Selling Agent Defendants rely upon the text of the contracts, to which Buyers make specific reference in the complaint (CPLR 3211[a][1]). In the contracts, Buyers acknowledged that they did not rely upon the selling agents' description of the units' dimensions or physical properties, except as specifically represented in the Offering Plan or contracts. Without reliance, Buyers can not make out a prima facie showing of liability for negligent misrepresentation (id.).

Buyers further allege that the Selling Agent Defendants owed a duty to them as real estate brokers and agents to refrain from representing that the roof setback was usable as their exclusive outdoor space. The Selling Agent Defendants and Buyers were engaged in an arms-length transaction, and Buyers provide no authority for the proposition that they owed a duty to correctly describe the legal use available for the roof area, particularly when Buyers had legal counsel to review the transaction. In any event, Buyers admit in the complaint that they received the correct information in the Offering Plan before they went to contract, and before the closing, and therefore there is no basis for finding that their damage was caused by the alleged breach of duty.

B. Starr's Motion

Starr moves to dismiss for failure to state a claim. The sixth cause of action alleges that Starr fraudulently induced the Buyers to purchase the units by certifying in the Starr Opinion Letter that the allocation of common interests was made in accordance with RPL Section 339-i(1)(ii). The seventh cause of action alleges that Starr knew that people would rely on the [*7]Starr Opinion Letter in deciding whether to purchase apartments in the Building, so it is liable for negligent misrepresentation. As with the Cantor Opinion Letter, Buyers do not make a prima facie claim for negligent misrepresentation because there was no detrimental reliance on the Starr Opinion Letter. Also, the author of an opinion letter is not liable in tort to another for negligent misrepresentation under New York law absent "either actual privity of contract or a relationship so close as to approach that of privity" (Prudential Insurance Company v. Dewey Ballantine, 80 NY2d 377 [1992]). No such relationship exists here between Buyers and Starr. The seventh cause of action therefore must be dismissed, as must the sixth, for adding the word "fraudulent" to the description of the Starr Opinion Letter does not save this claim. Moreover, completely undermining their claim against Starr is the assertion in the Amended Complaint that Starr told plaintiffs' attorneys that "Plaintiffs would not be acquiring the exclusive use and enjoyment of the Terrace for outdoor recreational use in connection with their acquisition of the C-Unit" (Amended Complaint, paragraph 292). Accordingly, it hereby is

ORDERED that the motions to dismiss by Cantor, Falk and Starr are granted, and the complaint is severed and dismissed as against them, and the Clerk of the Court is directed to enter judgment accordingly, with costs and disbursements as taxed; and it further is

ORDERED that counsel for the remaining parties shall appear in Part 55 for a preliminary conference on March 17, 2008 at 12 noon, and plaintiff's counsel is directed to notify all other attorneys of this conference.

Dated: February 20, 2008

ENTER:

_____________________

J.S.C.