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OFFERING PLAN FACTS

In New York State, the form and content of offering plans are affected by the following rules and regulations (obtained from the Real Estate Finance Bureau page of the NYS Office the Attorney General website):

Although each condominium or cooperative building may be different, the general content sections of each offering plan submitted are similar. Special Risks Section: This section discloses and describes the nature of risks which may be significant or are reasonably likely (in an unusual or disproportionate way) to increase the obligations of owners of a condominium or cooperative unit in future years. This includes increases in common charges (for condos), maintenance charges (for coops) or other carrying charges of a building in the future.

Introduction: Explains the purpose of the plan, the identity of the Sponsor of the offering plan, the aspects of unit ownership, the characterization of the units, the number of units and the owner of the property (if different than Sponsor).

Description of Property and Improvements: This section describes the property, states whether the property will be improved and units constructed in accordance with all applicable zoning and building laws and requirements and identify which zoning, building laws and requirements apply. Any major appliances not included in the price of the unit being sold needs to be highlighted and listed in the Special Risks Section.

Location and Area Information: Describes the location of the property and surrounding areas. If the project is not located in a highly urban area, available public transportation, shopping, recreational, medical, religious and educational facilities are described. Police, fire, water, sanitation, snow removal and road maintenance services are also listed and if not paid through the governing taxing authority, the cost of providing them are listed in the projected first year budget of the building.

Offering Prices and Related Information (Schedule “A”): The units that are being offered for sale (and not being offered for sale) are identified with the sales price of the units being sold. The units are that newly constructed are identified. The table (listed as Schedule “A”) lists all projected charges attributable to the units for a defined twelve (12) month period. These charges include common charges (maintenance charges if a cooperative apartment), projected monthly and annual applicable real estate charges and carrying charges for the first year of operation attending to each unit.

The Schedule “A” table may also contain footnotes that explain how the area of each unit is calculated, price changes, closing costs, determination of percentage of common interest, projected monthly carrying charges (including utilities). The subdivision, assessment and deductibility of real estate taxes are described. Projected applicable income tax deductions are also described.

For Cooperative Apartments, the share allocation and (if applicable) the dollar amount of income tax deduction per share for each apartment is listed.

Budget for Operation of the First Year of Operation: The Plan must describe all projected income and expenses for the first year of operation and labeled as Schedule “B”. The calculations are computed from the date it can reasonably be projected that operations should begin and no sooner than six (6) months after the offering plan is filed. The reservation of development rights and the anticipated carrying costs of yet to be built units need to be disclosed. A budget for the carrying charges for the individual units (including utilities) and any associated home owner association is provided.

For Cooperative Apartments, the Schedule “B” must contained detailed footnotes must support and explain the information contained in it. Items contained in the schedule include commercial income, labor costs, heating, cooling and hot water costs, utilities, insurance, real estate taxes, available abatements, management, service contracts, available contingency funds, mortgage interest and amortization.

Compliance with New York Real Property Law 339(i): The method of calculating the percentage of common interest for a condominium building by a real estate expert.

Commercial Units: This section describes commercial units in a mixed use condominium building. The description includes (but is not limited to) the use of the unit, amount of the common charges and associated special risks.

Changes in Prices and Units: This section states that the offering prices set forth in Schedule A must be changed by a duly filed amendment to the offering plan in the event that there is a price change for all of the units when the price change is an increase or decreases affecting one or more lines of units or unit models, or is to be advertised, or is a price increase for an individual purchaser. If applicable, the offering plan will state that prices and specified terms of sale are negotiable and the sponsor may enter into an agreement with an individual purchaser to sell one or more units at prices lower than those set forth in Schedule A without filing an amendment. This section also states that no change will be made in the size or number of units and/or their respective percentages of common interest, and that no material change will be made in the size or quality of common elements, except by amendment to the plan and, when applicable, to the declaration. Additionally, no material changes will be made to the units or the common elements unless the unit owners of the area affected consent to the proposed changes.

Accountant’s certified statements of operation: In the case of an occupied building include certified statements of income and expense, prepared on an annual basis, for the two most recent fiscal years of operation prepared by an independent certified public accountant.

Existing tenants: In the case of an occupied non-residential building, state that outside purchasers of occupied units buy subject to the existing leases. All leases may be inspected by potential purchasers at the office of the selling agent to ascertain the purchaser’s obligations under the lease.

Interim leases: This section states whether the owner of the building may rent any unit that is vacant before the closing and under what terms.

Procedure to purchase: Describe the essential terms of the purchase agreement which must comply with this Part. State the purchase procedure, including to whom and when the purchase agreement must be returned and the deposit payment made.

Notification to purchaser: Within 10 business days after tender of the deposit submitted with the purchase agreement, the escrow agent shall notify the purchaser that such funds have been deposited in the bank indicated in the offering plan, and shall provide the account number and the initial interest rate. If the purchaser does not receive notice of such deposit within 15 business days after tender of the deposit, he or she may cancel the purchase and rescind within 90 days after tender of the deposit, or may apply to the Attorney General for relief. Rescission may not be afforded where proof satisfactory to the Attorney General is submitted establishing that the escrowed funds were timely deposited in accordance with these regulations and requisite notice was timely mailed to the purchaser.

Financing for qualified purchasers: This section discloses that the plan must show the terms of any commitment by a sponsor or a lender procured by sponsor to finance the purchase of units.

Effective date: The plan must explain that the offer to sell is contingent upon the plan’s being declared effective and upon compliance with the relevant conditions and time periods described in the offering plan. The plan may not be declared effective unless bona fide purchasers, including investors, have signed purchase agreements for at least fifteen percent (15%) of the units offered under the plan.

Terms of Sale: The plan under this section must describe (among other things) the type of deed being given, the extent of the sponsor’s obligation to make repairs, that a temporary or permanent certificate of occupancy will be obtained as a condition precedent to closing and describe the status of title and the liens that will affect the units after the closing of title and the personal property within each unit.

Unit closing costs and adjustments: This section describes all estimated costs, fees, and charges to be paid or apportioned in connection with closings and specify whether they will be paid by purchaser or sponsor.

Rights and obligations of the sponsor: This section describes the rights and obligations of sponsor under the plan and applicable law with respect to the offering.

Control by the sponsor: This section describes the extent to which sponsor will or may control the board of managers after the closing of the first unit and the consequences to purchasers of such reservation of control with associated risks.

Board of managers: This section summarizes the important sections of the by-laws and declaration of condominium and describes how the affairs of the condominium will be governed.

Rights and obligations of the unit owners and the board of managers: This section describes the rights and obligations of unit owners and the board of managers.

Real estate taxes: This paragraph discusses assessment of the units regarding real estate taxes, tax benefits (abatements), the sponsor’s obligations concerning the real estate tax benefits and set out the decreases in the benefits during the period that the benefits are in effect.


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