August 20, 2008 10:37 AM
Cadwalader Managing Partner In Hamptons Real Estate Squabble
Posted by Nate Raymond
By Nate Raymond and Anthony Lin
It's been a tough year for Cadwalader, Wickersham & Taft's Robert Link, Jr.
Hit hard by the collapse of the market for mortgage-backed securities, the firm Link led for more than a decade has so far laid off 131 lawyers. Profits per partner dropped for the first time in years, and a management shakeup in February had Link stepping down as its longtime chairman.
Oh, and he has mold in his basement.
Since October, Link, who remains managing partner, has been embroiled in litigation over a $6 million house he bought last summer in the Hamptons. Now, Link and his wife, Dorina, are suing the developers in New York state court in Suffolk County, claiming they bought a luxury pad plagued by plumbing and construction defects. The Links are seeking more than $60,000 in damages.
The developers, Richard and Denise Sarcona, contend the Links knew what they were buying and didn't give them enough time to fix the house. "We delivered the house that we promised," says Leonard Shore, a Commack, New York-based sole practitioner who represents the developers. "As far as we're concerned, the plaintiffs are just using their legal muscle to get us to pay for alterations to the house after the fact."
Link declined comment through a spokeswoman for Cadwalader, which is listed as of counsel in the case. His lawyer, Stephen Angel of Esseks, Hefter & Angel in Riverhead, New York, says all the problems with the house are fully documented by a contractor, and that they plan to demonstrate those in court.
"We wouldn't have brought the case unless there was some detail for it," he says.
Newly constructed, Link's 7,000 square foot home is located on Halsey Path in Southhampton and comes complete with a swimming pool, tennis court, and 3,000 square foot basement.
A spokeswoman for Cadwalader says Link first began eyeballing the house in the spring. Link signed a sale contract July 24, 2007, six days after Cadwalader client Bear Stears warned investors they'd likely get little or anything from two hedge funds suffering under the weight of the subprime mortgage securities.
The funds' collapse was widely seen as the spark that kicked-off today's market problems, which would eventually be blamed for the Cadwalader layoffs. Yet at the time, trouble seemed far from the tony world of the Hamptons, says Jonathan Miller, a real estate appraiser with Miller Samuel in New York. "The high end market still had tremendous optimism," he says. "No one had the perspective that they do now."
Link acquired the home on August 13, 2007, for $6 million, according to property records and the complaint. The developers claim Link and his wife fully inspected the house and accepted it "as is."
Once they owned it, though, the Links discovered myriad problems, according to their complaint. The main deck lacked proper safety supports. The ground under the deck was graded toward the home instead of away, which they argued caused "a buildup of moisture and flooding, mold, and mildew problems in the basement."
The master bedroom's deck, the Links say, flooded even in moderate rain due to a bad drainage system. A lengthy list of plumbing problems also plagued the house. Then there was the swimming pool. It leaked, the Links argue, and its heating system was too close to the home. And the filtration system was faulty.
"They're not major defects, but they're defects," Angel says.
The Links contend all these problems are due to the developers' poor construction of the home. The Links say they didn't notice these defects when they bought the house. The damage was in excess of $60,000, according to the complaint, filed October 30.
The developers claim the suit is without merit. They acknowledge a few items existed on the "punch list," a discrepancy list showing construction defects, and say they would have fixed the problems. But they assert the Links didn't give them enough time to make repairs to the home. "They alleged a problem with drainage under the deck, and before we had time to fix it, they ripped out the whole deck," says Shore, the developers' attorney.
Discovery is underway. Meanwhile, the real estate market in the Hamptons is softening. Luxury homes like Link's have seen average sales prices fall 11.3 percent from a year ago, from $7.14 million to $6.3 million, according to a recent report from Miller's firm and Prudential Douglas Elliman Real Estate. Sales of houses, both standard and luxury, are down 56 percent in Southampton Township in the second quarter from last year, according to Suffolk Research Service.
Still, the Hamptons are unlike few other places in the world. While average luxury home prices are down, median prices climbed 10.3 percent to $4 million, the Miller/Prudential report says. After repairs, Link wouldn't have a problem flipping the house if he wanted to, even in this economy, says Michael Daly, a local broker who runs the Hamptons Real Estate Blog.
"He could turn around today and sell it for more than its worth," Daly says. "Easy."
Anthony Lin is a staff reporter with The New York Law Journal, a sibling publication of The American Lawyer.Make a comment