What To Discuss With Your Attorney Before Purchasing a Condo or Co-op
Before entering into a contract to purchase a condo unit or a cooperative apartment, the Purchaser’s attorney has the duty to uncover existing or potential problems. If the Purchaser discovers an issue after signing the contract, she or he will be out of luck most of the time. Thorough due diligence includes reviewing many items.
First and foremost, a complete review of the Offering Plan, which is the document describing what is offered to purchasers, will detail:
the specifications of the physical aspects of the property, such as the construction materials of the building, the façade, flooring, roof, HVAC systems, electrical wiring, plumbing, and all the appliances.
the permitted uses of common areas, amenities, and parking spaces;
the landscaping;
whether warranties about defects have been limited.
An inspection performed by an architect and an engineer will help the purchaser gain a better understanding of the quality of the construction, verify that all the systems are in good working order, and ensure that the actual square footage is consistent with the listing information.
The Purchaser’s attorney will run a lien and violations search and, if needed, require the Seller to remove them through an expeditor before the closing. In addition, a comprehensive legal review will focus on the minutes of the last three years’ board meetings to bring to light any critical issues affecting the building and/or the unit. One of the most crucial due diligence activities is an analysis of the by-laws and the rules of regulations. Arguably, two of the most important sections are those detailing the rental policy of the building and the procedure to comply to make renovation in the unit. Typically, co-op boards reserve the right to grant or deny consent for any extraordinary activity - although other chapters might assume more relevance depending on the needs and wishes of the Purchaser (for instance, the pet policy).
Finally, the legal due diligence findings should be summarized in a list of questions that the Purchaser’s attorney should submit to the company managing the condo or the co-op to understand how potential or existing issues are being tackled. Such as the status of pending litigations or whether occupants of the building made complaints about the noise or other nuisances.
Not less important, a financial review will confirm whether the amounts of common charges/maintenance fees, property taxes, and any assessments are consistent with what has been claimed by the sales agents of the Seller. Some properties enjoy property tax abatements for a more or less limited number of years. Although this is a welcome feature, a meticulous Purchaser will make an estimate of the monthly costs once the tax abatement expires. Other due-diligence items include verifying, with the help of an accountant, if the building is financially sound.