NYC Coop & Condo Purchases Require Due Diligence
Deciding to purchase a coop or condo in New York City is an exciting time! However, before taking such a big step, the proper due diligence investigation must take place.
Our transactional department strongly advises our purchasers to conduct a thorough inspection of the unit and the building itself by hiring a licensed inspection/engineering company prior to contract signing. This allows a purchaser to identify any potential issues or defects affecting the unit or building systems. After reviewing the inspection report, the purchaser can make an informed decision as to whether or not to move forward with the transaction or request certain repairs/credits carved into the contract of sale.
Corporate documents will undergo review prior to contract signing as well. The Offering Plan, all amendments, Bylaws, Condo Declaration, and Proprietary Lease (if a coop) are mandatory. Additional documents to review include the Certificate of Occupancy, House Rules, Building Insurance, Pet Policy, Sublet Policy, Alteration Policy, Board Package Applications, etc. This is helpful to paint a clear picture of the building and how it operates.
Financial review will include the past 2-3 years of the buildings financials as well as the next year’s budget, if available. This allows a purchaser to conclude if the financials/reserve funds are strong enough to proceed with the transaction and to assess for any potential assessments or maintenance increases.
Reading the board minutes for the past 2-3 years is extremely helpful. It is here a purchaser may learn of any upcoming repairs or projects which may trigger payment increases. A purchaser may also identify potential issues affecting the building or the unit itself, whether past or present. Possible litigations, violations, leaks, and owner disputes may be discussed as well.
Most coops and condos will agree to complete a questionnaire for a fee. The questionnaire is thorough and will address questions such as maintenance increases/assessments over the past few years, any potential increases coming up, upcoming building repairs/projects, issues affecting the building or unit, past and present, possible litigations, violations, open permits, special rules specific to the building itself, closing costs, flip tax, rules on financing, possible subletting restrictions, and much more.
Most due diligence is coordinated with the building’s management company. This helps the purchaser get familiar with the quality of the company chosen to manage the building.
Lastly, if possible, we encourage our clients to get to know the people who live in the building and the overall neighborhood, to get a feel of the living experience.