Skip to main content
Fulltext search
FILTER RESULTS BY:
RECOMMENDED IN RENT
Moving to NYC after college? Here's how to find a rental apartment
RECOMMENDED IN BUY
How buying real estate in NYC is unlike anywhere else
RECOMMENDED IN SELL
A guide to using a no-fee renovation loan from a NYC real estate firm
RECOMMENDED IN IMPROVE
How to make your NYC renovation more pet-friendly
BEST REAL ESTATE WEBSITE!
National Association of Real Estate Editors
BEST REAL ESTATE WEBSITE! National Association of Real Estate Editors
Brick Underground
Social Links
follow:
  • Facebook
  • Twitter
  • Instagram
  • Flipboard
  • search
Brick Underground
☰ Brick Underground
Brick Underground
Brick Underground
☰
Brick Underground
  • Buy
    • Buy
    • The Market
    • Investing
    • New Construction + Condos
    • Affordable Housing
    • Co-ops
    • Negotiating + Financing
    • How to Buy in NYC Guide
    A rendering of the roofdeck at 55 Broad Street.
    Rent
    Housing lottery launches for 143 apartments in the Financial District
    Aerial panoramic view of Red Hook, Staten Island, Brooklyn, and Verrazano-Narrows Bridge
    Sales Market
    24 NYC neighborhoods where median prices more than doubled in the past decade
    431 West 54th Street is a co-op building that allows subletting.
    Investing
    Want to buy an investment apartment to rent out? Here's what you need to know
  • Rent
    • Rent
    • Affordable Housing
    • Roommates + Landlords
    • The Market
    • The Search
    • How to Rent in NYC Guide
    Young woman using laptop at new apartment, with moving boxes around.
    Roommates + Landlords
    Didn't get your security deposit returned in NYC? A new chatbot can help
    A rendering of the six-story building in Park Slope.
    Affordable Housing
    Housing lottery launches for 45 rent-stabilized units in Park Slope
    Laura and her dog Jack
    Rent
    Why I moved to NYC from Brazil: I relocated for work and reunited with friends I made 15 years ago
  • Sell
    • Sell
    • Staging + Open Houses
    • Negotiations + Closings
    • Getting Ready
    • How to Sell in NYC Guide
    Aerial view of downtown Brooklyn
    Sell
    Median sales price in Brooklyn climbs to $995,000 in the second quarter
    Downtown New York City
    Sell
    Manhattan deals rose to highest level in nearly two years, defying national trends
    new condo building and older co-op buildings in Prospect Heights, Brooklyn
    Sell
    Brooklyn median price nears $1 million but the spring market is a question mark
  • Live
    • Live
    • Neighbors
    • Kids + Pets
    • Neighborhood Intel
    • Products + Test-drives
    • Troubleshooting
    FlatRate moving brick underground
    Live
    How to troubleshoot your move in advance
    Sponsored By flatrate
    Distressed woman sitting in her apartment
    Troubleshooting
    Ask Altagracia: My live-in partner is abusive. How can I get out of my lease?
    Sponsored By Outerbridge Law P.C.
    NYC apartment buildings with fire escapes
    Neighborhood Intel
    Can you sit on a fire escape in NYC? 5 things to know
  • Improve
    • Improve
    • Small Spaces
    • Small Projects + DIY
    • Renovations
    • Design + Architecture
    • Products + Services
    • How to Renovate in NYC Guide
    mini splits apartments new york city
    Products + Services
    Yes, you can install central AC in your co-op or condo unit. Here's how
    image
    Products + Services
    Take back your deck! How to win the war with mosquitoes and enjoy outdoor living again
    NYC apartment building with AC units
    Products + Services
    My neighbor's dripping AC is driving me crazy. What can I do?
  • Boards & Buildings
    • Boards & Buildings
    • Boards
    • Finance
    • Insurance
    • Legal
    • Property Management
    • Structure & Systems
    • Sustainability
    Burned and Boarded Up Windows
    When should your board hire a public adjuster?
    Manhattan GM
    What should we consider when renewing insurance for our building?
    Facade of NYC buildings
    How much is insurance on a NYC co-op or condo building?
  • Advertise
    • Advertise with us
    • Sponsored Content
    • Experts
    FlatRate moving brick underground
    Live
    How to troubleshoot your move in advance
    Sponsored By flatrate
    Distressed woman sitting in her apartment
    Troubleshooting
    Ask Altagracia: My live-in partner is abusive. How can I get out of my lease?
    Sponsored By Outerbridge Law P.C.
    Building facades in New York in winter
    Roommates + Landlords
    Ask Altagracia: I withheld rent due to inadequate heat and I'm being hassled to pay it back. What should I do?
    Sponsored By Outerbridge Law P.C.
  • Brick Report
  • About Us
  • About Us
The subscription service is currently unavailable. Please check again later.
Fulltext search
FILTER RESULTS BY:
New Main menu
  • Buy
    • Buy
    • The Market
    • Investing
    • New Construction + Condos
    • Affordable Housing
    • Co-ops
    • Negotiating + Financing
    • How to Buy in NYC Guide
  • Rent
    • Rent
    • Affordable Housing
    • Roommates + Landlords
    • The Market
    • The Search
    • How to Rent in NYC Guide
  • Sell
    • Sell
    • Staging + Open Houses
    • Negotiations + Closings
    • Getting Ready
    • How to Sell in NYC Guide
  • Live
    • Live
    • Neighbors
    • Kids + Pets
    • Neighborhood Intel
    • Products + Test-drives
    • Troubleshooting
  • Improve
    • Improve
    • Small Spaces
    • Small Projects + DIY
    • Renovations
    • Design + Architecture
    • Products + Services
    • How to Renovate in NYC Guide
  • Boards & Buildings
    • Boards & Buildings
    • Boards
    • Finance
    • Insurance
    • Legal
    • Property Management
    • Structure & Systems
    • Sustainability
  • Advertise
    • Advertise with us
    • Sponsored Content
    • Experts
  • Brick Report
  • About Us
    • About Us
    • Advertise
  • About Us
SUBSCRIBE TO OUR NEWSLETTER →
Social Links Footer
  • Facebook
  • Twitter
  • Instagram
  • Search
The Market [ SPONSORED ]

3 things you must know before buying a new condo

By Sandor D. Krauss, Esq.  | February 13, 2012 - 10:25AM
image
SHARE:
Share to Facebook
Share to Twitter
Print
More...

If you’re considering buying a new condo, you may be familiar with some of the risks, such as construction defects, sponsor control of the board, warranty and punch-list issues

But if you’re anything like the clients who walk into my office every day, there are a few more potential time bombs that may take you by surprise:

1.  The developer has the right to convert the building into a rental—and hang onto your deposit for months until the switch is official

Under the New York Code of Rules and Regulations (the Martin Act) and in BOLD print on the front cover of the Offering Plan, it reads: 

BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL UNIT, THIS PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE UNITS ARE OWNED BY OWNER-OCCUPANTS OR INVESTORS UNRELATED TO THE SPONSOR.

Accordingly, your deposit can be held hostage indefinitely until the sponsor files the appropriate paperwork with the Attorney General’s office to effectively abandon the plan.

I have three clients in this limbo situation—two in Brooklyn, one in Manhattan—and unfortunately there is nothing they can do but wait for their money back, then start their apartment hunt again.

Not much can be done here as it is never the sponsor’s intention to rent units and this decision is made after hard deposits are delivered.

2.  The offering plan is laced with hidden costs

With offering plans clocking in at several hundred pages, developers rely on the fatigue-and-fine-print factor to camouflage a battery of hidden costs that they intend to pass on to you at the closing table.

Recently, perhaps because buyers have come to expect concessions like payment of transfer taxes and sponsor's legal fees, I have seen sponsors raise these costs and attempt to pass along new ones, including:

  • Reimbursement to the sponsor’s attorney for ‘offering plan expenses’ of up to $2,000.
  • Payment of the sponsor’s broker’s fee.  This is a hefty sum ranging from 1% to 3% of the purchase price. That’s $10k-$30k on a $1 million condo. This is rare, but we have seen this.
  • Tax abatement filing reimbursement

It is important to work with an attorney who not only knows new development, but can use this knowledge to attempt to reduce these fees.

For example, fees that go to the condominium (e.g., working capital and reserve fund contributions, and insurance premiums for the first year) are generally non-negotiable, while fees that help the sponsor reduce its own costs (like legal fees and transfer taxes) can easily be negotiated. Remember, sponsors have carrying costs, and for the time it takes to negotiate these things and get a client to close, the sponsor may be better off agreeing and closing.

3.  Your property taxes will be significantly higher than the offering plan says when that abatement wears off

Most tax abatement programs and the offering plan summary and opinion relating to these programs are complicated and some attorneys don’t even understand them. Most importantly, buyers should be aware that programs such as the 421-A tax abatement program (which is being phased out) do not take increases in the tax rate into consideration or increases in the assessed value of your home. If you expect either of those to go down over the long haul, think again.

Make sure that you are confident that you will be able to afford an annual tax bill that climbs steeply as that abatement wears off. Also make sure you consider the depressing effect this will have on your apartment’s resale value.   Is the apartment still competitively priced if you factor in unabated property taxes?

Buying new is great. It is just crucial that you have accurate advice and that you are going into the transaction with your eyes open.


Sandor D. Krauss is the founding partner of SDK, a New York City real estate law firm specializing in residential and commercial real estate transactions.

 

 

Brick Underground articles occasionally include the expertise of, or information about, advertising partners when relevant to the story. We will never promote an advertiser's product without making the relationship clear to our readers.

topics:

buying developer negotiating new construction
SHARE
TWEET
BRICK’S PICKS
NYC apartment building with AC units
My neighbor's dripping AC is driving me crazy. What can I do?
Historic brick facades of NYC apartment buildings
Getting overcharged by a landlord? Here’s how the Tenant Protection Unit helps rent-stabilized tenants
Apartment buildings in Soho
New Rent Guidelines Board report justifies a rent freeze, tenant advocates claim
Brooklyn apartment buildings
Understanding net effective rent: Here's how to calculate your real monthly rent
image
How much should you renovate your NYC apartment or house before selling?
Council Member Shahana Hanif hold press conference before the City Council vote on Arrow Linen spot rezoning.
City Council signs off on 10-story towers for Arrow Linen site
Follow Brick on Instagram
@brickunderground | #brickunderground
Brick UndergroundBRICK UNDERGROUNDREAL LIFE. REAL ESTATE. REAL NEW YORK.
Social Links Footer
  • Facebook
  • Twitter
  • Instagram
  • Search
Main menu footer
  • Buy
    • The Market
    • Investing
    • New Construction + Condos
    • Affordable Housing
    • Co-ops
    • Negotiating + Financing
    • How to Buy in NYC Guide
  • Rent
    • Affordable Housing
    • Roommates + Landlords
    • The Market
    • The Search
    • How to Rent in NYC Guide
  • Sell
    • Staging + Open Houses
    • Negotiations + Closings
    • Getting Ready
    • How to Sell in NYC Guide
  • Live
    • Neighbors
    • Kids + Pets
    • Neighborhood Intel
    • Products + Test-drives
    • Troubleshooting
  • Improve
    • Small Spaces
    • Small Projects + DIY
    • Renovations
    • Design + Architecture
    • Products + Services
    • How to Renovate in NYC Guide

Get more news you can actually use...

Email Address

Delivered to your inbox weekly - for free.

*By signing up you agree to receive occasional emails on behalf of our sponsors

Footer Menu
  • About Us
  • Advertise

Copyright 2009-2024 by BND Ventures Inc | Privacy Policy | Terms of Service | Ad Choices | Login