When you're buying new construction, it pays to pay attention to the fine print in the offering plan. But sometimes you also need a translator.
We asked real estate lawyer and coopandcondo.com blogger Ron Gitter to elaborate on the Special Risks section of an offering plan, a topic he touches on in his Condo Buyer's Tool Kit. What sorts of things are listed as Special Risks--and what do they mean?
Being one of the two or three people actually working this morning in New York City, Gitter promptly emailed us some telling examples of the genre lifted "from a recent Offering Plan that had a total of 50 special risks--14 pages worth. Sometimes I'm tempted to use a mine field analogy, but I'm positive these days."
- That lending might not be obtainable if at least 35% of the units are sold. Translation: If you sign a cash contract and you can’t get a loan, it’s your problem.
- As is customary [italics added] in new luxury condominium offerings, the purchaser pays the sponsor’s transfers taxes and attorney’s fees. Translation: In the current economic climate, we hope it’s still customary…
- No security or bond is posted to secure the sponsor’s obligations under the Offering Plan. Translation: If the sponsor runs into financial problems, it could become the purchasers’ problem as well.
- Sponsor has applied for a 421-a tax abatement, but no assurance is given that the abatement will be granted or whether the full abatement will be granted. Translation: Hopefully, taxes will be abated for a period of time, but if the abatement is not granted, sponsor is not liable.
- No representation is made about who will own the commercial unit and that the commercial unit can be used for any lawful purpose. Translation: Think Whole Foods, but it could be Ricky Discount.