Purchasing a condominium unit due dilligence-Quick Tip

There are currently a great number of sponsor sold condominium units in the New York City market place. A sponsor is the person or entity who is developing a building as a condominium (or cooperative). Like everything else, there are condominium developments that have been built well and there are others that have been built poorly. Prior to entering into contract, the offering plan and all amendments should be reviewed. The offering plan is a full disclosure of a project to the public that is filed through the New York State Attorney General’s Office. The offering plan lists the name of the sponsor of a condominium building, its principals and other developments the principals have built. Research the names of the principals and their other developments on the internet. You may find references to any of the above and if the buildings and the units were built well or poorly. Even if the price is right, the carrying charges are low and the location of the building is prime, you do not want to invest in a building or unit that is poorly constructed. It is more likely that you will have problems in the future. Even if a warranty is given by the Sponsor, if the sponsor has a history of poorly constructed buildings, you may still need to go to court to enforce your warranty behind other disgruntled purchasers.

I am currently representing a client who wishes to purchase a condominium unit from a sponsor of a newly constructed building. Inquiry reveals a very real concern that the sponsor (a very large developer) is not very liquid and has a reputation of selling poorly designed and constructed buildings. As part of our due diligence we will need to ascertain what percentage of the units is being kept by the Sponsor. This is important because if there are a large number of units being held by a sponsor of a condominium and that sponsor is not able to pay common charges, the business of the condominium association may be severely hindered. We wish to ascertain how realistic the first year budget is. If it is not, you may be subject to additional assessments or an increase in common charges.

 

 

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