The elegant, brick-faced tower, rising 31 stories above Third Avenue, was completed in 2000, and marketing agents assured prospective owners that the building would be among the most luxurious in Manhattan.

The building attracted high-flying buyers like Yankees slugger Jason Giambi, real-estate magnate Steven Witkoff, YES cable-network chief Leo Hindrey, HSBC chief of U.S. operations Youssef Nasr and television-fixture stockbroker Todd Eberhard (who has since been indicted on charges that he swindled his clients out of millions). Each unit has 10-foot ceilings, and most have oversized windows. The standard bathrooms have attractive marble walls, and the kitchens come equipped with mid-to-upper-tier appliances.

But many residents say that a host of problems have plagued their apartments from the start, and that they have been living in the lack of luxury.

Some of the issues at hand, like improperly caulked moldings and sloppy mortar work, are relatively insignificant and easily fixed; others, like buckling wood floors and massive flooding problems, are more serious. An independent engineering firm has estimated the needed repairs to total at least $2.3 million—though that sum could easily skyrocket.

"Most of the items are relatively minor, but in sum total, it amounts to a lot," said Assistant Attorney General Oliver Rosengart, who’s handling the government’s case.

The firm responsible for the Empire’s construction was RFD Third Avenue Associates, the upstart powerhouse helmed by Aby Rosen, Michael Fuchs and Trevor Davis. According to Mr. Davis, he and his partners came to an agreement in principle last week to begin making all the necessary repairs.

"RFD has informed all concerned parties that they are committed to fixing whatever needs to be fixed at the Empire," said Mr. Davis’ spokesman, Steve Solomon.

There’s still considerable debate, of course, over what falls in the category of "needs to be fixed." The lawyer representing the Empire’s board of managers, Stuart Saft, chairman of the Council of New York Cooperatives & Condominiums, said he was satisfied with RFD’s initial commitment, but also that he was prepared to go to court if the parties failed to find common ground—because in addition to the construction issues, many residents are also incensed that a tax abatement they were promised by the developers three years ago has never materialized. Mr. Davis chalked the problem up to bureaucratic snafus—but in the meantime, the delay is costing owners tens of thousands of dollars.

"In the not-too-distant future, everything will be resolved," Mr. Saft said. "Whether it’s through litigation or administrative action, it will all be resolved, and all these homeowners will be happy."

That it came to this is remarkable in itself for a company that has developed over a dozen residential towers in the city, including the Impala, the Seville and 425 Fifth Avenue; and the scope of its projects is only widening—including a soaring commercial tower near Ground Zero.

Many of the owners at the Empire bought their apartments raw, from blueprints, or gutted the ones they bought: Late 2000 was a frothy time in the Manhattan real-estate market, and buyers quickly snapped up most of the building’s 77 sponsor units, which ranged in price from just under $1 million to over $6 million. Many signed contracts after seeing only the blueprints and a sample apartment—a practice common with buzzy buildings.

"It was considered the best residential condo building in New York City," said Richard Steinberg, managing director of Ashforth Warburg Associates. "I sold an apartment there for $6 million, and 30 days later my guy flipped it for $9 million."

But not everyone is willing to sell their lemon apartments and move on without a fight. The owner of one of the building’s penthouse units, for example, has filed a lawsuit against RFD, alleging that the developers never made good on their promise to repair certain deficiencies that the owner discovered before signing a $3.9 million contract on the unit. The owner, James Sykes, a money manager at a private firm, made a so-called punch list of problems that included doors and windows that were misshapen and couldn’t be opened, improperly grouted flooring and mismatched granite countertops. Mr. Sykes claims that RFD owes him and his wife the $75,000 that RFD had placed in escrow to ensure a timely repair. The lawsuit is currently pending, and Mr. Davis’ spokesman countered that it is the Sykes who are holding up the repairs.

"RFD has done 98 percent of the repairs," said the spokesman, "and they would have done the rest, but they were denied access or the opportunity to do the work."

Mr. Sykes’ lawyer, Allen Brill, said his client has an extremely strong case and hopes "it will be resolved expeditiously."

One former resident of the building, who spoke to The Observer on the condition of anonymity, said that RFD had to replace the flooring of her unit twice before move-in day.

"It was buckling, and they kept trying to tell us it was normal," the former owner said. "We said it shouldn’t have ripples under our feet."

The contretemps over the building’s standard-issue wood floors is a tricky one. In its offering plan, RFD only specified "wood floors," leaving the company the option—which it exercised—of using cheaper laminate flooring instead of hardwood planks, which are much more expensive and labor-intensive to install. Even so, the independent engineering firm that examined the Empire concluded that the building’s subcontractors did a sloppy job on many of the installations. According to a report that the firm, Rand Engineering, released on Feb. 14, "Many defective conditions were noted throughout the wood flooring, including scratches, chips, warped segments, improperly aligned/leveled segments, sloppy joints, and missing or improperly installed pieces. Additionally, the flooring does not appear to be properly adhered to the subfloor, evident by noise sections."

Rand also found similar problems in many of the units’ kitchen cabinetry and countertops: low-quality, damaged materials and low-quality installations. The big question is: Who should pay to remedy the situation? According to the condo board’s lawyer, Mr. Saft, the issue has yet to be resolved.

But for the former resident with the buckling floors, the problems kept on coming. Shortly after moving in, the resident and her husband returned home from a weekend getaway to find that their apartment was flooded. The plumbers concluded that there had been excess debris in the drain.

"They said the drainage system was clogged, and it couldn’t drain fast enough," the former owner said.

But about a month later, after a large storm, the couple was awakened by a phone call at 2 o’clock in the morning.

"My husband leapt out of bed and landed with a splash in four inches of water," the former owner said. "The phone call was from the building. Apparently, we were leaking onto the floor below us."

It turned out that the problem wasn’t excess debris—rather, the drain had never been installed properly in the first place.

"There was a lot of finger-pointing after the second problem," the former owner said. "The fact that a drain could be installed untested—you just don’t expect it from a building of that caliber. You pay a lot of money, and you hope they would be expecting these things."

Earlier this year, massive leaks from a third-floor balcony resulted in fairly extensive mold damage to the second-floor retail tenant, the Halstead Property real-estate company. It caused enough of a disruption that Halstead is seeking legal relief from the Empire.

"Halstead Property has filed a lawsuit against the owner and condominium board in an effort to see that the leak be permanently fixed," Halstead’s spokesman said in a statement.

Another former owner at the Empire, who also spoke on the condition of anonymity, said that so many problems in his unit were evident on move-in day that he tried to back out of his $1.6 million purchase within minutes of first walking in.

"The granite was really an inferior quality, and it had a lot of stains," said the owner. "Some of the walls looked like they had wet spots, which could indicate there were some leaks."

The owner said he tried to get the building’s developers to buy the unit back from him, but they refused. Luckily for the owner, however, the Empire was a hot commodity, and another buyer was only too happy to take it off his hands.

"I was ecstatic just to break even," he said.

In its physical inspection of the building, Rand Engineering left no nook unprobed. Its 89-page report detailed deficiencies in almost every area of the building, including improperly caulked joints on the roof and terraces, problems in many heating, air-conditioning and electrical systems, and walls that lacked proper insulation. And although the report, coupled with the experiences of some former tenants, might paint a picture of a building in terrible disrepair, Mr. Saft said the situation is typical of what he’s seen at many newly constructed buildings.

"Even the most prestigious buildings have these sorts of problems, because the contractors get sloppy," he said.

At the same time, property values have consistently risen at the building over the last three years. And if values aren’t rising now as fast as they once were, that is surely a phenomenon mirrored in the citywide decline of the luxury residential market.