Hello, I've got an accepted offer and financing lined up and now have received the offering plan. To give you some background, I am the first person to buy into a new 8 unit condo-building in Brooklyn. This is my first time and everything up to this point was fairly straight forward. I figured I just sign the purchase agreement and move in move in by April (what listing agent told me). Of course,... [more]
Hello, I've got an accepted offer and financing lined up and now have received the offering plan. To give you some background, I am the first person to buy into a new 8 unit condo-building in Brooklyn. This is my first time and everything up to this point was fairly straight forward. I figured I just sign the purchase agreement and move in move in by April (what listing agent told me).
Of course, it's never that simple, especially in NYC. Long story short, there are two issues that are making me reconsider.
- Sponsor has yet to receive Temporary Certificate of Occupancy and in turn the Offering Plan declared effective. They cannot get TCoO until 2 units are sold, I would be the first person to buy in. This means closing could potentially be months away. Awaiting word from sponsor on how long this will actually be but how would they know? They'd need another offer to come through on another unit right?
- 421A contingency based off final Certification of Eligibility. The building has 421A but the FINAL certification won't come through (if at all) until 90 days after the TCoO. The sponsor has received preliminary approval but not yet final which is not guaranteed.
So I'm in a position where closing is open ended and the tax abatement is uncertain. I really want this place but am not going to do anything stupid. Is all this normal for a new development? Is this more of a thing where I just need to give it time? I have done research on the developer and his other buildings and everything seems to check out. Since this is my first time, I am being particularly cautious.
I just wanted to get a second opinion from the community at large. Your help is appreciated!
[less]
Response by mkirkshaw
almost 7 years ago
Posts: 1
Member since: Oct 2017
anyone?
Ignored comment.
Unhide
Response by streetsmart
almost 7 years ago
Posts: 883
Member since: Apr 2009
Hello Mk,
Are you working with an attorney?
Ignored comment.
Unhide
Response by 300_mercer
almost 7 years ago
Posts: 10553
Member since: Feb 2007
You need a good attorney.
Ignored comment.
Unhide
Response by KeithBurkhardt
almost 7 years ago
Posts: 2981
Member since: Aug 2008
Everything that you have referenced is very common for new development. One important question is how long have they been marketing the building for? Have you had an inspection of your unit completed yet (certainly recommended for an 8 unit new development condo in Brooklyn). Did your agent or yourself dig into recently sold similar comps in the neighborhood? Do you have any background on the developer or recently completed projects?
Keith Burkhardt
TBG
Ignored comment.
Unhide
Response by 30yrs_RE_20_in_REO
almost 7 years ago
Posts: 9876
Member since: Mar 2009
If it's very important for you to move in by April you are probably taking a risk.
Ignored comment.
Unhide
Response by 300_mercer
almost 7 years ago
Posts: 10553
Member since: Feb 2007
I would ask for at least 20 percent of purchase price as escrow which will be yours if the sponsor is not able to get a TCO within “x” months from your purchase.
Ignored comment.
Unhide
Response by 30yrs_RE_20_in_REO
almost 7 years ago
Posts: 9876
Member since: Mar 2009
"They cannot get TCoO until 2 units are sold"
Are you sure about that? I understand they can't get the Offering Plan declared effective until greater than 15% are subscribed, but is getting the TCoO tied to sales?
Ignored comment.
Unhide
Response by itesfai
almost 7 years ago
Posts: 77
Member since: Nov 2012
Question for OP: How long has it been since you signed the contract? How long has the project been on the market? If it’s fairly new, few months old, then don’t stress, like Keith said, it’s common in new dev.
There are solutions for all your problems but it’s tough to discuss without looking at the offering plan & your purchasing contract. Hopefully your attorney is good and has some language in the contract allowing you an exit with your deposit if the sponsor doesn’t deliver “x.y.z. by such and such date”. Hopefully. And any delays beyond that date you will need to negotiate some concessions like 300 Mercer suggested, maybe custom work they can do for you or covering all of your closing costs, etc...
In order for Offering Plan to be declared effective, sponsor needs 15% in contract with 'bona-fide' purchasers.
The TCO has nothing to do with sales velocity or Offering Plan being declared effective. It is simply the sign off on the construction of the building, think plumbing, electrical etc... Is it safe to live until final CO is issued?
But The 421-A does need an offering plan (if he doesn’t have one, he can proceed with application but needs to provide one before final certification). Seems like you have reached this far. Two things that seem like delaying your enjoyment of this unit is
1) Construction. What is delaying the completion of the building? go to DOS and see what comes up for violations, stop work order, etc.. Sometimes it’s a little thing that takes time but isn’t a big deal so sponsor has to wait it out. Is that the case here?
2) Sales: If you are the only one in contract, why is that? Any changes to pricing, marketing, etc.? get some info on this. Also have your attorney dig here, usually sponsors attorneys have a different take than listing agents.
In your case the 421A is connecting the TCO with the Offering Plan which usually don’t intersect. From my understanding anyways.
Keep us informed.
Ignored comment.
Unhide
Response by itesfai
almost 7 years ago
Posts: 77
Member since: Nov 2012
*go to dob i mean
Ignored comment.
Unhide
Response by 30yrs_RE_20_in_REO
almost 7 years ago
Posts: 9876
Member since: Mar 2009
In addition:
After getting the requisite amount of units in contract, the Sponsor must file an amendment to the Offering Plan declaring it "Effective" and then it has to be approved by the AG's office. Then the Sponsor must file another amendment declaring the Offering Plan "closed" before closings can occur. So, for you to close on your unit, there would have to be another purchaser sign a contract, the Sponsor would have to file the amendment declaring the plan effective, it would have to be accepted, they would have to file another amendment declaring the plan closed, and it would have to be accepted. This is all in addition to the TCoO issue and 421 issue. And understand that in each of these cases doing these things starts various clocks ticking which puts pressure on the Sponsor to finish and sell out the project which they would rather not have started. So they would obviously rather have way more units in contract before they start any of that.
Ignored comment.
Unhide
Response by mlalchandani1
almost 7 years ago
Posts: 4
Member since: Jun 2011
My recommendation is to have a reasonable ending date on the contract. I had a client in-contract for a unit in a new dev in Gowanus, and the project stalled past 6 months after the anticipated closing date. We were able to walk away from the project. An April closing is unrealistic if they have just launched sales and you are the buyer with contracts out - IMO.
'/%3e%3c/g%3e%3c/svg%3e)
anyone?
Hello Mk,
Are you working with an attorney?
You need a good attorney.
Everything that you have referenced is very common for new development. One important question is how long have they been marketing the building for? Have you had an inspection of your unit completed yet (certainly recommended for an 8 unit new development condo in Brooklyn). Did your agent or yourself dig into recently sold similar comps in the neighborhood? Do you have any background on the developer or recently completed projects?
Keith Burkhardt
TBG
If it's very important for you to move in by April you are probably taking a risk.
I would ask for at least 20 percent of purchase price as escrow which will be yours if the sponsor is not able to get a TCO within “x” months from your purchase.
"They cannot get TCoO until 2 units are sold"
Are you sure about that? I understand they can't get the Offering Plan declared effective until greater than 15% are subscribed, but is getting the TCoO tied to sales?
Question for OP: How long has it been since you signed the contract? How long has the project been on the market? If it’s fairly new, few months old, then don’t stress, like Keith said, it’s common in new dev.
There are solutions for all your problems but it’s tough to discuss without looking at the offering plan & your purchasing contract. Hopefully your attorney is good and has some language in the contract allowing you an exit with your deposit if the sponsor doesn’t deliver “x.y.z. by such and such date”. Hopefully. And any delays beyond that date you will need to negotiate some concessions like 300 Mercer suggested, maybe custom work they can do for you or covering all of your closing costs, etc...
In order for Offering Plan to be declared effective, sponsor needs 15% in contract with 'bona-fide' purchasers.
The TCO has nothing to do with sales velocity or Offering Plan being declared effective. It is simply the sign off on the construction of the building, think plumbing, electrical etc... Is it safe to live until final CO is issued?
But The 421-A does need an offering plan (if he doesn’t have one, he can proceed with application but needs to provide one before final certification). Seems like you have reached this far. Two things that seem like delaying your enjoyment of this unit is
1) Construction. What is delaying the completion of the building? go to DOS and see what comes up for violations, stop work order, etc.. Sometimes it’s a little thing that takes time but isn’t a big deal so sponsor has to wait it out. Is that the case here?
2) Sales: If you are the only one in contract, why is that? Any changes to pricing, marketing, etc.? get some info on this. Also have your attorney dig here, usually sponsors attorneys have a different take than listing agents.
In your case the 421A is connecting the TCO with the Offering Plan which usually don’t intersect. From my understanding anyways.
Keep us informed.
*go to dob i mean
In addition:
After getting the requisite amount of units in contract, the Sponsor must file an amendment to the Offering Plan declaring it "Effective" and then it has to be approved by the AG's office. Then the Sponsor must file another amendment declaring the Offering Plan "closed" before closings can occur. So, for you to close on your unit, there would have to be another purchaser sign a contract, the Sponsor would have to file the amendment declaring the plan effective, it would have to be accepted, they would have to file another amendment declaring the plan closed, and it would have to be accepted. This is all in addition to the TCoO issue and 421 issue. And understand that in each of these cases doing these things starts various clocks ticking which puts pressure on the Sponsor to finish and sell out the project which they would rather not have started. So they would obviously rather have way more units in contract before they start any of that.
My recommendation is to have a reasonable ending date on the contract. I had a client in-contract for a unit in a new dev in Gowanus, and the project stalled past 6 months after the anticipated closing date. We were able to walk away from the project. An April closing is unrealistic if they have just launched sales and you are the buyer with contracts out - IMO.