Q: We’re buying a place that’s not finished, and we want to be certain that the sponsor tends to do what he says he will. If he doesn’t, we want to know what kind of chances we would have to recover any money if we can sue him. The last thing we want is to be ready to sue and then have him claim he has no money and can't finish the work.
What's the best way to find out about a developer's reputation?
A. That's a question that hundreds if not thousands of NYC condo owners today are probably kicking themselves for not asking earlier. Aligning yourself with a developer who not only finishes the project but stands by it is critical--because no matter how skilled the developer is, odds are there will be some problems that need correcting. (See The top 7 construction defects.)
As for how you can find out in advance, BrickUnderground's expert panel says it depends on whether you want to take a DIY approach, or whether--much as you should hire a property engineer to inspect not only your unit but as much of the rest if the building as possible--you decide to pay a professional to do a more thorough reputation check than you can do on your own.
“Checking the sponsor on Google and using word-of-mouth are not enough. You need to know from a thorough-on-site public records check whether this sponsor has ever been sued” and whether the suit is something to worry about, says investigative lawyer Philip Segal.
Because most developers set up separate companies for each of their individual projects, you will need to run a check on any other companies he may have now or has had in the past. Much of the necessary information is not fully accessible online; records have to be physically extracted from courthouses and read by someone who knows what to look for, says Segal.
“Did he ever operate under another company name? In another state? Who can we talk to about him who’s had experience either as a buyer or litigation opponent? That’s the kind of history you want to know about,” he explains.
As for the sort of sleuthing you can easily do on your own, start by looking at the offering plan to identify the names of the principals involved in the project, says real estate attorney Jeffrey Reich. “A simple Google search [of those names] could return a treasure trove of information.”
Also search real estate discussion forums like StreetEasy and blogs including CurbedNY andBrownstoner for specific mentions of the developer. Real estate broker Jacky Teplitzky recommends searching TheRealDeal.com too. Consider posting a question on discussion forums of those sites, where possible—and don’t forget to ask your real estate lawyer about the sponsor's reputation, assuming you found your attorney on your own, not through the recommendation of your broker or the developer.
“We often have a sense about most developers unless they are new to the field, in which case all bets are off,” says Reich.
It’s worth a try calling the New York State Attorney General’s office; ask to speak to the attorney assigned to the offering plan, suggests real estate lawyer Dean M. Roberts. “This person could let you know if there any pending issues relating to the building and if the developer is current with any required amendments. In general, the attorney general’s office could also let you know if any of the developer’s other projects had known problems or were not in compliance with amendment filings etc.”
You could also look at past projects and, using sales history information available onStreetEasy.com, call a broker who recently sold there. “Ask them what they have heard about the developer,” suggests real estate broker Deanna Kory. “You could even ask to talk to an owner through them.”
As for determining how full the developer’s pockets are should you and/or your prospective neighbors wind up suing, “you need to see how much equity he’s got in the properties he owns,” says Segal. “There’s no point in going to court if you can recover nothing because you’re in line behind a bunch of banks or other secured creditors.”
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