Buying pre-construction in New York

No sale before the plan

In New York the developer is called the sponsor, and a sponsor cannot offer or sell condominium units until the Attorney General’s office has accepted its offering plan for filing. The rules for newly built condominiums are in Part 20 (opens in a new tab) of the Attorney General’s regulations.

The plan is long, often hundreds of pages, and everything else rests on it: the building, the budget, the sponsor’s obligations and the risks. The purchase agreement comes with it. Before you are bound, the sponsor must either give you at least three business days to review the plan and its amendments before you sign, or at least seven days after you sign to rescind and have your deposit refunded. The plan says which.

Your deposit stays in escrow

Deposits on a new condominium are held in escrow under a written escrow agreement, and the sponsor may not spend them on construction. In the Attorney General’s model purchase agreement language (PDF, opens in a new tab), deposits “are and shall continue to be the Purchaser’s money” until closing: they may not be mixed with the sponsor’s funds or pledged, and the interest they earn is credited to the buyer at closing.

This is the sharpest difference from Florida, where deposits above 10 percent may fund construction. New York deposits usually run 10 to 20 percent of the price, and all of it stays protected until the day you close.

When the plan becomes effective

Under section 20.3 of the Attorney General’s regulations (opens in a new tab), a plan cannot be declared effective until buyers have signed purchase agreements for at least 15 percent of the units offered. Until then the sponsor may still abandon the offering, and if it does, deposits go back to the buyers.

The plan also states when the sponsor expects the first closing. If that date slips by 12 months or more, buyers must be offered the chance to rescind. If revised budget projections come in 25 percent or more above the original, buyers must again be offered rescission, with at least 15 days to decide. While the sponsor holds unsold units, it pays their common charges and taxes.

Read every amendment

Sponsors file amendments as the building takes shape: new prices, new timelines, revised budgets. Once you have signed, the sponsor may not make material changes to your unit’s size, layout or share of the common elements without your consent. Read each amendment as it arrives, with your attorney, and watch for any that offers a right to rescind and the deadline to use it.

Questions to ask before you sign

1. Has the offering plan been accepted for filing, and which amendments have followed?
2. Do I have three business days to review, or seven days to rescind after signing?
3. Who holds the escrow, and at which bank?
4. How many units are under contract, and when does the sponsor expect the first closing?
5. Which closing costs will I pay, including the sponsor’s own transfer taxes?
6. Does the building have a property tax abatement, and when does it end?
7. Has the sponsor completed buildings like this one before? Can I see them?

Our guide to buying new construction in New York covers the taxes and costs at closing.

Why an advisor helps

New York buyers usually work with a real estate attorney from the first draft of the contract, and they should. A buyer’s advisor adds what the documents leave out: how this plan’s prices compare with the buildings around it, which lines sell first and which amendments matter. If you are weighing a new building in New York City, we are glad to talk it through. 

General information only, not legal or tax advice. New York’s rules change, and every offering plan is different. Review your documents with a New York real estate attorney before you sign.