A Change of Plan
Can We Close the Satisfaction Gap?
There can be a disconnect between what the sales office of a developer promises and what is actually delivered by the sponsor. But maybe it’s possible to bridge the distance between the purchaser’s expectations and the post-closing reality of the bricks and mortar.
Unlocking the Secrets of the Offering Plan
As discussed on this blog, the offering plan is a complex and lengthy document, which serves as a shield against liability for the developer, provided that the required disclosures are made in accordance with the regulations handed down by the Real Estate Division of the New York State Attorney General’s office. The attorney who reviews this document is obligated to read above, below and between the lines to find the sometimes hidden truth of what’s being offered. In most cases, the risks to the borrower are clearly stated, in other situations, detective work is required. Although a good portion of each plan would be considered “boiler plate” (that is, the same legalese that always appears), each plan has its own set of tricky provisions and potential “gotchas”. With the clock ticking, the client waits patiently for the attorney to review the document and to report back on the good, bad and otherwise. Perhaps it’s time, however, for purchaser’s involvement in the offering plan review process to be more hands on.
It Started With the Special Risks
Sometime ago, I made a policy decision to forward a number of provisions of the offering plan to the client, particularly the “Special Risks” section, with a view towards improved understanding of the proposed purchase. As most folks in the industry know, the special risks section at the front of the offering plan should be more appropriately titled “You’d Better Read This”. In other words, the front of the plan is where the developer dumps all of the material positives and negatives about the development. In truth, there are other provisions lurking further into the document that require scrutiny, but the Special Risks section goes a long way in describing what needs to be known. On reflection, that was a good first step, but there may be a better way to educate the consumer.
Due Diligence By the Pound
I understand that it would be a daunting task and probably impossible for a client to absorb the substance of an entire plan in the same manner that is undertaken by the attorney. That being said, there are any number of details in the document that may not lend themselves to summary and review by the client may be advisable. For a minimal expense, a purchaser should consider obtaining an additional copy of the plan for his or her own perusal. With the amount of money being spent on an apartment, a purchaser should have the opportunity, whether it is taken advantage of or not, to review the specifics.
Not Exactly One Size Fits All
Required reading for proposed purchasers is not appropriate in any number of situations, particularly for foreign purchasers, who may have difficulty with the language, or for high end purchasers, who just don’t do that kind of thing. Nevertheless, in everyday situations, buyers should be enticed to read the document that will have a significant impact on the ownership of their unit. With ingenious liability protections for failure of the sponsor to deliver as promised, the offering plan is a sobering balance to the marketing presentation that conjures up a living environment that sometimes fails to meet expectations or the facts. The offering plan brings home the seriousness of the decision to put one’s faith in the sponsor’s abilities. The small print actually means a great deal.
Residential Reality: It’s All About the Plan
So purchasers, in addition to picking out furniture and working the color chart, make time to review a document that will significantly impact your ownership of the apartment as well as your investment. The sponsor has gone to great lengths to protect its interests and to minimize liability for things that go wrong. Isn’t a little late night reading worth it?