WHFirm Attorney Speaks at First-Time Home Buyer Event

For clients buying into a Condominium or Cooperative, often their broker or attorney will provide them with a massive tome called the “Offering Plan.”

When faced with approx. 500 pages of potential homework, clients often ask: what is this, why is it important, and do I really need to read the whole thing?

Here’s what you need to know:

What is it?

The Offering Plan is presented to the initial buyers purchasing directly from the Sponsor/Developer. It represents what the Sponsor committed to constructing prior to the building being built or converted to a condominium or cooperative. The Offering Plan is then passed from seller to buyer like an heirloom tied to the unit.

Why is it important?

If buying a new construction unit, the Offering Plan (with any amendments) may be your sole source of diligence. If the building is not yet constructed, it will tell you what you are putting your money towards. Sponsors will need to deliver a unit in accordance with both the Offering Plan and the Purchase Agreement.

For resale transactions, the information becomes increasingly dated and may no longer be relevant. These buyers should be careful not to rely solely on the initial Offering Plan with respect to their individual unit or the overall condition of the building, but all unit owners still need to keep the Offering Plan in a safe place to pass on to their future buyers.

What should I focus on if reading the Offering Plan?

Diligence is conducted until a purchaser is happy and comfortable proceeding, so the level to delve into any of these documents is self-determined. For buyers hoping to personally review the Offering Plan, finding the table of contents or index in the first few pages is crucial for helping locate the following key sections:

1. “Schedule A” – this is a snapshot of the building showing a list of units at the time of the offering, original percentage of common interest/shares, the original purchase price, number of rooms, projected common charges/maintenance, and initial treatment of any storage, parking spots, terraces – to the extent these exist in the building.
2. “Special Risks” – this section expands on the additional risks associated with the project. Cautious buyers may review this section for things ranging from how to care for the wooden flooring and limited warranties for the unit and/or building to the existence of lot line windows (windows that may need to be boarded up in the future).
3. “Floor Plans” – floor plans are rare finds in the offering plans of cooperatives and older buildings. When found, they are helpful to compare against the current configuration of the unit for any alterations to the unit that may have been done by the current or prior owner.
4. “Description of Property” and any Architects Report – these sections may contain projected structural information about the building, materials used, appliances installed, building amenities, and systems. Sometimes this can be helpful identifying materials used in the past that are no longer acceptable in the present (e.g., asbestos and lead paint).
5. “By-Laws” and other governance documents – initial by-laws, documents for board governance, and initial ownership documents are typically towards the back of the Offering Plan. For purchasers into a cooperative, a copy of the Proprietary Lease is generally included with the original house rules.

Lastly, please note that the Offering Plan may have been continually amended by the Sponsor/Developer, so it’s important to check that the information you are reviewing has not been overridden by a later amendment.

Of course, you should always let your attorney know if any questions!