Asked and AnsweredI am considering an apartment in a new construction condominium. There is park under development by New York City that will greatly enhance the value of the condominium when it’s completed. Although the sponsor’s salesperson indicated that the first phase of the park will be completed in the next year or so, the Offering Plan contains a “Special Risk” that states that the sponsor gives no assurance as to when, if ever, the park will be completed. Who and what should I believe?
There’s an old expression: believe half of what you see and nothing of what you hear. Some portion of same applies here. A buyer of a new condominium unit has the burden of verifying everything that he or she has been told by the sponsor’s sales department, as well as to check the factual representations about the development disclosed in the Offering Plan. There are numerous Internet resources that will allow a buyer to get a snapshot of the new development as well as the latest gossip about the development’s future and the neighborhood in which the project is located (Google, curbed.com and the real estate section of The New York Times, for starters).
Every Offering Plan has a section at the beginning of the document entitled “Special Risks”. In my opinion, this section of the Offering Plan contains the most important disclosure information about the development. In this section, the sponsor is obligated to disclose all of the material aspects of the Plan, both positive and negative. If the Offering Plan contains a “Special Risk” in which the sponsor makes no assurance that the park will ever be completed, that statement must be taken seriously and factored into your decision to go forward with the purchase. In the old days, when prices seemed to go only in one direction (that would be up), even if an amenity wasn’t completed exactly as promised, the increase in the apartment’s value might compensate for the lost creature comfort. That hedge simply no longer exists. Once a buyer is on notice that an important amenity may or may not be completed, the buyer must undertake the due diligence necessary to determine the likelihood of the amenity’s completion and the impact on the apartment’s value if the amenity never comes to fruition. In most cases, promised amenities eventually get delivered. It’s the timetable for delivery that is often out of whack. Whenever you are relying on the government to complete a consumer enhancement (like the Second Avenue subway), expect significant delays.
Residential Reality: If an Offering Plan makes no assurance about the completion of a park or other significant amenity, take that advisory to heart and do your research in order to insure that “green acres” does not morph into “tar beach”.