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--particular when perusing the Special Risks section.
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?
Gitter lifted some examples "from a recent Offering Plan that had a total of 50 special risks--14 pages worth:
- 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 buyers' 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: Hope for Whole Foods, but it could be McDonald's.