Lender and Developer Sue Their Law Firms for Malpractice, Blame $70M Loan Default on Legal Advice
Both a lender and a developer involved in a failed New York City real estate project are pointing fingers at their respective lawyers, blaming a $70 million loan default on bad legal advice.
In the most recent New York state court suit filed earlier this month, James Kennelly of Kennelly Development and others contend that Cozen O’Connor and Blank Rome provided inaccurate zoning advice, leading the plaintiffs to overestimate the value of the property, the Real Deal reports.
The lawsuit seeks $100 million in damages.
Earlier this year, Arbor Realty Funding LLC filed a similar $69 million malpractice suit against Herrick Feinstein, contending that an attorney there provided an inaccurate opinion about the size of the condominium tower building that could be constructed under city zoning law, according to Reuters Legal.
However, law firm chairman Harvey Feuerstein said in a written statement that Herrick Feinstein didn’t serve as the developer’s zoning counsel and had advised it to seek a zoning opinion elsewhere.
“The real reasons Arbor lost money on this loan were the severe downturn in the real estate market and a fatal crane collapse at the site, which greatly diminished the value of this property,” the document said.
A fatal crane collapse at the construction site and adjacent blocks in March 2008 killed seven people. Subsequently, the Department of Buildings said it had erroneously approved the construction of a condominium tower project at the 51st Street site and refused to let the project proceed. It eventually went into foreclosure.
