Overview of the Condominium Offering Plan
The condominium offering plan is a prerequisite for the public offering or sales of condominiums under section 352-e of the General Business Law and must be filed with and approved by the Department of Law. The Department of Law is authorized to issue and enforce rules and regulations pertaining to the offering process.
Following the introduction of the condominium offering plan in our previous article, below we focus on an overview of the contents of it. There are two parts to the condominium offering plan:
Part 1
1. Special Risks
This section takes precedence in the review process because the sponsor must disclose any information that presents a significant risk or is reasonably likely to affect the common charge obligations for unit owners, as well as other crucial information.
This section also serves as a guide to direct readers to more detailed sections for comprehensive information.
2. Introduction
Describing the plan’s purpose and material terms of the offering, this section offers foundational information of the condominium, including aspects of ownership, the role of the sponsor, and their intent concerning unit sales or rentals.
A critical point emphasized here is the potential effect on board control if the sponsor chooses to rent, rather than sell. Note that this may be important to certain purchasers.
3. Description of Property & Improvements
Providing an overview of the building, this section details the features and amenities associated with the property.
4. Location & Area Information
This is a general description of the neighborhood and local services. In particular, it offers useful contextual information on the surrounding area and the condominium’s location.
5. Schedule A
Essential information for unit owners, this section includes the offering price; square footage of the unit; type and number of rooms; real estate taxes; common charges; and percentage ownership of common interest.
Together with Schedule B (discussed below), it serves as a key reference point for understanding the financial implications of ownership.
6. Schedule B
This part presents projections for the condominium’s first-year operating budget. Supported by detailed footnotes, it provides a comprehensive overview of anticipated expenses. As such, it will provide valuable insight into the expenses incurred to run a condominium throughout the projected 12-month period.
Note that these figures are subject to substantial change if one is purchasing after the projected range of dates.
7. Procedure to Purchase:
This section contains the essential terms of the purchase agreement, escrow fund management and dispute resolution process.
8. Terms of Sale
Addressing critical aspects of the sale — including the risk of loss, deed type, repair obligations, certificate of occupancy, state of title upon transfer and tax-related matters — this section will help the buyer to become well-informed.
9. Closing Costs & Adjustments
This is an overview of the closing costs with examples. However, a more precise estimate of closing costs should be obtained from legal professionals given the potential for variation.
Keep in mind that these figures do not take into account adjustments since that will be based on items such as pre-paid or unpaid real estate tax and maintenance.
10. Rights & Obligations of Sponsor
Detailing the sponsor’s rights and obligations (including post-closing responsibilities), this section explains which obligations continue to exist beyond the closing date, such as punch-list repair items.
11. Control by the Sponsor
This section discusses the extent of control that the sponsor has over the board, in addition to potential risks that board control may never be turned over to unit owners for the described reasons.
12. Board of Managers
Describing the board management process, this section summarizes crucial aspects of the declaration and bylaws, thereby providing a comprehensive understanding of governance in the condominium.
13. Rights & Obligations of Unit Owners & Board of Managers
Particularly crucial for investor-owners, this section includes information on unit owners’ rights related to selling or renting units, as well as procedures and restrictions.
It also includes topics such as the right to repair, common charge determinations, insurance requirements and mortgage rights.
14. Real Estate Taxes
This area covers the methodology on how real estate taxes will be assessed against units, especially if units are not separately assessed at the time of closing.
Part 2
This portion contains copies of the documents referenced in Part 1 of the offering plan. Documents include floor plans; declarations; rules and regulations; bylaws; relevant statutes; the architect’s report; the purchase agreement; and certifications by parties involved in the offering plan. Of note here are the declaration and bylaws.
