Filing an Offering Plan for A Condominium In New York
Previously, we introduced the concept of condominiums and how a condominium offering plan works. Next, we’ll present a general overview of the process of filing an offering plan for a new condominium development in New York after all architectural plans have been finalized.
Regulatory Approval
Due to their unique characteristics, condominiums require approval from the New York Department of Law (DOL) before they can be offered, marketed or sold to the public. The DOL is the regulatory authority that oversees the offering process to ensure compliance with relevant laws, including Section 352-e of the General Business Law.
Initial Considerations
First, consider the time and cost required to prepare, submit and secure approval for an offering plan from the DOL. The timing is crucial, especially when financing is involved, because interest accrues daily and obligations — such as taxes and service contracts —continue. Plus, preparing an offering plan can take up to two months or more, while DOL approval can range from a few months to several years, depending on the complexity of the development and the need for follow-up requests from the DOL.
Notably, all individual principals must be disclosed in the offering plan, even if the sponsor is an entity. Additionally, out-of-state principals and entities must file a Designation of the New York Secretary of State to receive the service of process.
Preparation of the Offering Plan
The offering plan must also be drafted in strict adherence to applicable laws, which outline an extensive list of requirements beyond the scope of this article. As such, the time required to prepare the offering plan depends on the timely receipt of necessary information from third parties.
Usually, the plan undergoes frequent updates, and changes in one area may necessitate adjustments in others, so timely cooperation from third parties — including insurance agents, appraisers, architects, tax professionals, title companies and managing agents — is crucial. As such, it’s important to engage these parties early in the process and set clear expectations for document completion timelines.
Sponsor Information
The sponsor and individual beneficial owners must submit notarized signatures on various documents and disclose personal information. Specifically, individual beneficiaries must be disclosed, even if the sponsor is an entity owned by another entity. The professionals and third parties involved in the project should also be prepared to provide notarized documents.
Keep in mind that follow-up requests for information and revisions are also a standard part of the DOL’s review process, which underscores the importance of complete and accurate documents from the outset.
Submission Process & Payment
Adhering to the DOL’s detailed submission rules is mandatory. Once the offering plan is ready for submission, the sponsor — either directly or through an attorney — must pay half of the offering plan filing fees upfront (along with other ancillary fees in full) and the remaining half upon approval. The sponsor can then submit the offering plan to the DOL.
Currently, the most efficient way to complete the offering process is electronically. This involves requesting an upload link from the DOL, then uploading the plan and required documents according to strict guidelines for organization and file-naming conventions.
Factors Affecting the Speed of DOL Approval
The speed of DOL approval is influenced by factors such as the full completion of the initial draft of the offering plan, prompt cooperation from third parties, construction financing, the overall complexity of the development and any changes to existing condominium plans that require DOL approval.
Expediting the Process
Overall, anticipating and preparing for the filing of an offering plan — including early engagement and cooperation from third parties — can significantly expedite and streamline the condominium offering plan process.
