Purchasing real estate in New York City has never been more competitive, and home values continue to rise. When looking into a purchase of real estate, many buyers understandably concentrate on location and price, with amenities and size a close second. Of course, finding a place with your “must-haves” is no easy task. Once you find your Dream Apartment, and you are zooming in on your find, your next level of scrutiny should be the physical condition of the building overall, and the offering plan.
Know this: The purchase of a unit in a cooperative or condominium has many significant legal and financial consequences. Prospective purchasers should seriously consider the considerable risks associated with purchasing a unit in a cooperative or condominium in New York City.
A prospective purchaser should read the entire offering plan AND consult with an attorney BEFORE signing a purchase agreement.
Typically, there are rules and regulations that govern the sale of interests in cooperatives and condominiums, which are made pursuant to the terms and conditions of an offering plan. Every offering plan includes detailed information about the physical aspects of the building or group of building being offered, whether it’s new construction or an existing building or group of building undergoing conversion.
Additionally, it is important for prospective purchasers to ensure that any representations by a building sponsor or its representatives are set forth in writing (e.g., a rider to the purchase agreement) between the prospective purchaser and sponsor, if not already stated in the offering plan.
Often, in newly constructed buildings there are misunderstandings and discrepancies between what is provided for in the offering plan, assurances by a selling agent, and what is actually reality. Therefore, the recreational facilities, landscaping, building façade, upgrades, common areas, appliances and amenities within the units should be fully detailed in the offering plan, as well as the management’s maintenance and future plans for the building and grounds. Ultimately, the price of the home, namely what you ended up paying, should reflect the quality of the materials used in construction and continuing upkeep of the property.
For purchasers of an apartment in an existing building that is being converted to cooperative or condominium ownership, the sponsor is required to have the building evaluated by an engineer. Furthermore, the offering plan must disclose all of the defects visible to that engineer or known to the managing agent as a result of complaints. Not every defect has to be corrected, as long as it has been disclosed. It is rare for an existing building to be without any defects, so prospective purchasers should read the offering plan carefully.
Besides reading the offering plan section which describes the physical condition of the building, there are other critical things a buyer should do to protect themselves BEFORE purchasing.
In existing apartment buildings, there is always a need for repairs and maintenance of the building, and in new buildings, there is often a “punch list” of yet-to- be completed items by the builder or management of the building. However, a buyer should not be deterred by a need for some repairs. Just be aware of potentially expensive building-wide repairs and know how much such repairs are likely to cost. Ultimately, capital improvements translate into higher common charges and/or maintenance charges. The most expensive problems in existing buildings involve facade defects. Pointing (repairing the mortar between the bricks), roof and elevator repairs are also very costly. Other significant problems include upgrades to the mechanical systems including plumbing, electrical and boiler replacements.
To learn about potential and known building defects, good resources of information include minutes of board meetings, recent financial reports which may also contain information about defects, and the actual or potential cost of certain repairs, or even the local building department, which may have violations on record. A buyer can also ask the sponsor and/or the selling agent, for a list of known or disclosed defects. It never hurts to ask.
At The Siegel Law Firm, P.C., we welcome your inquiries, whether buying or selling real estate. Feel free to contact us with any questions… and good luck!
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