Red Flags Every Urban Homebuyer Must Check After a Near Disaster in NYC

With the country facing a housing supply crunch and no easy answers in sight, projects like the conversion of the Pfizer office buildings in Midtown Manhattan into a mixed commercial-residential complex should be well-received. 

Unfortunately, last week, one building was evacuated after workers found that some of the steel support columns on the 21st floor were buckling. Disaster was averted by emergency personnel, and the building is now considered “safe and stable.” But buyers might not be lining up to buy in with the same excitement as before. 

This avoided collapse may have a ripple effect among buyers and owners going forward: As more commercial buildings undergo transformations, older structures get updates, and new housing is built, how can you ensure you’re buying into, or living in, a safe building?

True disasters are rare

First, for some good news: In general, buildings don’t fall down. When they are built, they rely on rigorous engineering math, testing, inspections, and monitoring. 

“There are defects, and there are total freak anomalies. This is a total freak anomaly,” says Steven Sladkus, a co-founding partner at Schwartz Sladkus Reich Greenberg Atlas LLP and real estate attorney in New York. “I would be shocked if the developer didn’t do everything they had to do with engineers and calculations to make sure that the load bearing was fine.”

Immediately following the emergency, Ahmed Tigani, commissioner of the New York City Department of Buildings, said that the building conversion had undergone “extensive, exhaustive review” for two years before construction began.

Engineers will now work to determine what caused the buckling, by reviewing original drawings, contractor records, and postfailure photographs. 

But no matter what the answer is, the damage—in terms of the building wooing potential buyers— is already done, and similar trepidation may be found around the city and beyond. 

“If somebody is buying into a 40- or 50-year-old co-op, and the steel beams behind the wall started to corrode, could the building fall down? Highly, highly unlikely. I don’t think we’ve ever seen that happen,” says Sladkus. “It might just put people’s antennae up a little higher when buying into a relatively new building.”

You should be able to spot, or uncover, damage

For the most part, visual inspections that reveal large cracks will tell you a lot about the building’s structural safety.

“Generally, if the structure is damaged, you’ll see signs of it right away,” says MIT professor and structural engineering specialist Jerome Connor.

That said, potential buyers of a condo or co-op in a new or updated building have to do their due diligence on both the unit they want and the building at-large.

“A buyer should understand the condition of the building itself. That means reviewing engineering reports, board meeting minutes, reserve studies, pending special assessments, financial statements, insurance information, and any reports discussing deferred maintenance or major capital repairs,” says Jacqueline Salcines, a real estate attorney and licensed Florida real estate agent. 

Who can buyers rely on?

Buyers should know that other parties in their purchase, such as their lender, will be in their corner when it comes to identifying structural issues. But they need to have a role in the purchasing process, which likely won’t start until the building is complete. 

“A situation like what happened at [the Pfizer building] is a different animal because it happened midconstruction, before the building ever had buyers in it. There’s no certificate of occupancy yet, so there’s no financing conversation happening at all. At this stage, the research burden sits almost entirely on the buyer and the buyer’s attorney, not the lender,” says Ashley Harris, director of homebuyer education at Neighbors Bank. 

If you become aware that a building you’re interested in has some history of issues, no matter how minor and even if the issue was resolved, know that the record of it won’t fade. Even if neighboring properties sued because of the issue, it can jeopardize your ability to obtain financing. 

“Appraisers are trained to look for anything that could affect value or marketability. If a building has a publicly documented structural event on its record, the appraiser may call it out, which can trigger additional review before the loan moves forward, and it’s ultimately the underwriter’s job to decide whether that risk is acceptable and what conditions to attach to the loan,” says Harris.

The insurance ripple effect

Another cost that can show up for buyers and owners alike when there is a structural or safety issue is insurance. 

“A documented structural event often pushes a building’s master insurance premium up at renewal, sometimes substantially, because the carrier now sees a claims history or elevated risk on that address,” says Harris. “Some carriers require an updated engineering report before renewing. Others decline to renew altogether, pushing the HOA into the surplus insurance market, which tends to be pricier and less comprehensive. Higher premiums flow straight into monthly HOA dues, so the cost of a structural incident doesn’t stop at a one-time special assessment.”

This is where the fallout of an issue like what happened to the Pfizer Building can reverberate. For buyers, does this mean it will be harder to sell their unit if they end up buying in that building or one with a similar issue? It’s possible—because even if you find an interested buyer, lenders and insurance providers will have a different perspective. 

Know a building’s history

In general, dealing with structural flaws and their aftermath should be a rare circumstance. If you’re a buyer or a new owner of a condo or co-op, any issues you run into should be or should have been revealed in the regular course of business. But for those looking for a way to avoid these issues entirely, one tactic is to start with taking a strong look at new construction. 

“All my construction litigation over the years have been with new construction or buildings that have been gut-rehabilitated,” says Sladkus. “Now, when we look at developments going up, it’s ‘How fast can I get it up, and how fast can I sell to get out of this project?’”

Buyers don’t need to assume the worst about new construction or dismiss older buildings as risks waiting to happen. What they do need is a clear picture of a building’s history: who built it, how it was reviewed, and what’s happened since. That’s the kind of research that protects a purchase after the news cycle moves on.