When people or entities purchase condominiums or cooperatives in New York, they usually receive a large document known as an offering plan. This document can be as long as 500 pages in some cases. That alone makes an offering plan daunting and intimidating. This offering plan, however, should not be overlooked. Additionally, assumptions should not be made that in it is everything that should be in it, and out of it is everything that should be left out of it. An offering plan is an important part of the real estate transaction. Here are the basics of what you should know.
What is a New York Offering Plan?
An offering plan, also referred to as a prospectus, is created by the sponsor or developer of a condominium or cooperative. The plan is provided to the initial buyers of the property. It discloses all the important information about the real estate development project and outlines what the sponsor or developer committed itself to construct before any of the construction actually began. This plan is then passed along to each new buyer.
The State of New York and the attorney general oversee the real estate development projects, and as such, also oversee the publication of the offering plan so that the general public can access it, too.
Why is a Review of an Offering Plan Important Before a New York Real Estate Transaction?
As mentioned, an offering plan provides essential information about the property you are about to buy. If applicable, special risks will also be among the important facts detailed in the document.
An offering plan, however, is not necessarily drafted for the layperson's reading pleasure. There are terms and clauses that may not make sense. There may also be information strategically placed and hidden in that document that could be to your detriment, but only a trained real estate attorney can identify and address.
Things Your New York Real Estate Attorney will Look For When Reviewing the Offering Plan
It is important to have an attorney review the offering plan because there could be certain pitfalls or issues that can be uncovered. So, the attorney will confirm the basic facts generally but will specifically look for:
- Disclosures in the special risks section because this section expands on the risks inherent to the development project –buyers can get an understanding of things like limited warranties for the unit or building or things like lot line windows and wooden flooring requiring special care;
- Schedule A because this section acts as a snapshot of the building and provides things like the original common interests or shares, original purchase price, original number of rooms, projected maintenance costs, and – if applicable –treatment of storage, parking lots, etc.;
- Description of the property is a section that could contain important information, like what materials were used to construct the building – materials like asbestos and lead paint can pose significant health problems; and, among other sections,
- The by-laws and other applicable governance documents, like board governance documents, initial ownership documents, and proprietary lease for cooperatives.
Diligence is necessary to make sure that you are comfortable with your property purchase. Always contact a real estate attorney in New York with specific experience reviewing offering plans.