Reiner, Reiner & Reiner,
LLP
Attorneys at Law
80 Wall Street - Suite 1018
New York, NY 10005
(212) 269-2466 voice
(212) 269-2467 fax
info@reinerlaw.com e-mail
Purchaser's Checklist
[Please note that we intend the following material only to inform you of our methods. Some of the material is not in layperson terms. We do not offer the following as legal advice. To protect your interests, you should obtain legal counsel to interpret or apply any law or legal procedure.]
PURCHASER:
OUR FILE NUMBER:
PREMISES_______________________________________________________
CLIENT______________
Address:
Phone:
SSN
Engagement letter prepared?
BEFORE CONTRACT IS SIGNED:
-- Purchaser to sign our engagement letter outlining our services and setting forth the fee arrangements.
-- Counsel purchaser not to give up his present occupancy rights until a closing date is reasonably certain, i.e., not until all approvals of the sale are obtained and lender's counsel is ready to close.
CONDO/CO-OP PRE CONTRACT CHECK LIST:
1) Review prospectus (with all amendments), bylaws, certificate of incorporation, proprietary lease [for unusual clauses], and house rules for special risks, especially as to restrictions on use, subletting and occupancy and subsequent transfer of unit and as to quality of life issues: commercial tenants, dry cleaners, food vendors, x-ray equipment and personal security.
2) Review Board minutes for evidence of
a) need for major repairs or
b) litigation endangering financial stability, c) Impending maintenance increases or assessments, and Sec. 216 qualification problems.
3) Review three years' financial statements:
a) Maintenance arrears of over 5% shows sloppy management (Times 7/23/95)
b) Accounts payable exceed 5% of annual maintenance? Only substandard suppliers would allow this.
c) Prudent reserve fund should equal four months' maintenance. (Times). Over and above working capital?
d) Mortgage maturity soon? Refinancing likely to result in maintenance increases.
e) Check to see that no increases in maintenance will occur in the near future as the result of expiration of 10- or 12-year J-51 or 421(a) tax abatements, or disclose effects
f) Maintenance should not be more than $1.10/ft; otherwise, price will be adversely affected. Corcoran, NYT 2/27/94, RE Sec. P 13
g) Get seller to represent that there are no further amendments to the prospectus and that the attached is a copy of the latest certificate of occupancy for the building.
h) Does sponsor retain larger portfolio of unsold apts? If so, has it complied with recent regs as to disclosure of ability to meet current maint & other obligations on this and other co ops? Seller to warrant that sponsor's share of unsold apts is less than 35%; otherwise, it will be impossible for a purchaser on resale to secure institutional financing. Lender has duty to disclose information as to sponsor defaults, etc. if it is also sponsor's lender. Butler v. Home Sav. NYLJ 9/8/94 P. 22 Col 2.
i) Restrictive sublet policy benefits quality of life but may force sale of apts if owner's circumstances change.
j) If a co-op, is the price per share in line with recent sales in the building? (Condo: per percentage of undivided interest?)
k) Give client option of ordering BOLD Property Information Systems report on neighborhood for $ 200. plus tax. (673 2200)(Ext. 250) 149 5th Ave, 16th Fl., NYC 10010-6801. Covers drug arrests, treatment centers, new zoning, new construction, noise, etc.
l) Is an assessment in effect? Recently expired? In prospect? Review budget to see that reserve fund and/or assessments is/are not being used for ordinary maintenance.
m) Large ticket items in prospect? Roof, facade, window replacements, security systems, mechanical systems, asbestos removal, elevator replacements, and problem tenants in units adjacent to purchased unit. Review any referenced engineering reports.
3) Have management respond to our Questionnaire Letter.
-- Have purchaser arrange
a) licensed engineer's inspection ($400), especially as to structural defects, roof, electrical, plumbing, heating, sewer/septic, drainage (also from adjacent property), well (if applicable) and underground oil tank [see below], and air-conditioning systems (if applicable) are in proper working condition and need no replacement or repairs, including pest infestation report ($50) (client to accompany inspector during daytime, on weekend if necessary) ; try Universal Home Inspection or HouseMaster (NYT 1/23/94); consider getting contractor's estimates of repair work; pay special attention to hazardous conditions, especially if the property is income property, e.g. lead paint or asbestos, which cause litigation. Recd flyer from Critermum Engineers (founded 1957) >staffed exclusively with licensed engineers and architects (800-242-1969)
b) a report based sensitive tests made during considerable airflow conditions to detect unacceptable levels of radon gas, formaldehyde gas, airborne asbestos fibers, chlorinated pesticides, toxic chemicals or water contaminants and
c) reports on underground oil tanks, if any ($75). Cost of cleanup, if feasible, is considerable. If not feasible, realty is worthless. Even if co-op/condo, warn client that general rule is caveat emptor and that expensive hazardous materials cleanup and/or repair/replacement of roof, exterior, elevators and building systems may be in prospect. These would call for possibly large assessments or maintenance increases, even if not disclosed in prospectus or minutes. Remedy: New engineer's report at a cost of circa $ 3,000. Caveat(?) recent ghost case?
-- Have purchaser check Building Department records for Certificate of Occupancy and check ZONING map, resolutions, subdivision and partition laws and regulations, as well as SELLER'S TITLE REPORT AND SURVEY ($ 425+). Title premium is $ 1,200 on $200K. Is subdivision approval required? IS BUILDING OR SURROUNDING STRUCTURES LANDMARKED?
-- Order title insurance
--If premises are residential real estate (improved by 1-4 family bldg)(but not co-op apts or condos in bldgs of more than 4 units), then Disclosure Statement of brokers must be prepared and signed. Real Prop Law Sec. 443. [See "Brokerage" blank forms]
(Rural) Seller represents a) that no portion of the property is a wetland [If so, DEC approval will be required for any change therein or building within 100'], and b) that he has no knowledge of any existing or planned high-tension electrical transmission wires or cellular phone or other microwave transmitter on the premises or within 2,500 feet thereof.
(Fee title) (A) Notwithstanding any other provisions of this Contract, in the event that Seller is entitled to adjourn the Closing and such adjournment would extend the closing beyond the expiration date of purchaser=s loan commitment so as to cause the loss, in whole or in part of a commitment fee or the cancellation or material adverse change of any terms of the commitment, and purchaser shall be unable, in good faith, to extend such commitment on equal or better terms, purchaser shall have option, exercisable by written notice, to either (i) terminate this contract or (ii) close, provided seller shall reimburse purchaser for any and all fees, costs or expenses incurred by Purchaser. In such event, Purchaser shall be entitled to a reasonable adjournment for the purpose of attempting to extend the commitment or obtain substitute financing.
(B) Seller represents and warrants that he has no written notice of any unpaid, pending or contemplated assessment for public improvements or other wise that may affect the Premises.
Co-op Board may charge purchaser about $300 for application and any Bank loan recognition agreement.
Closing costs: Bank Application 300-500 , Pts 1% of loan, credit 50, legal 425, appraisal 250 and 1 yr's h/o ins prem 750; lien search ($ 350) or fee/mortgage insurance; rec deed 50; rec mtg 50; mtg tax: Under 500K: NYS 3/4% in NYC area (with $25 credit for residential use) payable by borrower, with 1/4
% payable by lender. plus (if in NYC) 1% NYC [If 500k+: 1% NYS plus
a) 1.125% NYC for 1-3 fam homes & condos, or b) 1.75 NYC for other realty (less $25.)] UNLESS A CO_OP TRANSACTION, TRY SAVINGS BY ASSIGNING EXISTING MORTGAGE TO NEW LENDER; grat 50-100;.
--TERMS: Price:_____________________
Cash: ____________________on Contract:__________________
on Title:____________________
Monthly Maint.__________________ Deductible: % Flip tax responsibility?
PMM Amt: $
Financing Contingency Y N
Amt: $
Lender:
Interest Rate:__________________ Payable____________
Amortization___________________________________
Maturity________________________________________
Closing date:________________
Seller:______________
Address:
SSN ____________
Atty:_____________________
Managing Agent:
Building Exec.:
Phone:
Closing Coordinator:
Phone:
CONTRACT TO PROVIDE:
- Have seller execute FIRPTA affidavit simultaneously with contract, unless the transaction is for less than 300K and the purchaser will use the premises as a residence. If seller is a foreign person, make arrangements to remit 10% of purchase price to Internal Revenue Service within 20 days of closing, or obtain from I.R.S. an appropriate certificate of exemption from or reduction in this requirement.
- Right to assign not limited; purchaser at its option may accept such title as seller is able to convey, without abatement.
- Deposit in escrow with attorney in interest-bearing FDIC-insured account. Bank named? SSN to be reported to bank shall be seller's SSN, and, if year end shall occur before closing, seller shall report the escrow account interest earned to year-end. Should, ultimately, the purchaser receive a refund of the deposit, seller shall be entitled to reimbursement for all income taxes paid on account of interest to year-end.
- Personal Property included to be listed. Shall be in good working order at closing.
- May be subject to covenants and restrictions and zoning and any state of facts in survey and inspection to date provided same do not prohibit erection and maintenance of existing structure(s). Seller has no knowledge of claims by reason of encroachments by or on premises or objections, easements and servitudes apparent from an inspection of the premises.
- (Rural) Seller to represent that the property has egress and is contiguous and that [there are no][he has no knowledge of any] buried oil storage tank or filler pipe.
-Try to negotiate less burdensome liq dam clause, perhaps to the effect that if the Seller sells for more than the contract price, plus expenses, within 6 months, then liqu damages shall be appropriately reduced.
- Seller represents that the premises are connected with a municipal sewer.
- (Rural) Seller shall deliver to P on the signing of this contract, a copy of any plot plan or survey of the premises in the possession of the S. Seller represents that during the period of his ownership the roof has not leaked and that the basement has been free of flooding and excessive dampness and either
a) that the premises are connected to a public sewer, or
b) that the well, the septic tank and leaching fields are all located entirely within the boundary lines of the premises and serve no other premises, and that he knows of no facts or conditions which would impair the operation of the septic system, and that during the period of his ownership the well and septic system have required only routine maintenance and that the well has to date produced water adequate for domestic use, both as to quality and quantity.
- Seller represents that there are no leased fixtures on the premises.
- Possession shall be delivered at closing broom clean and free of tenancies (unless the contract is made subject to tenancies). Do not consent to any arrangement whereby, in a co-op, the seller may retain possession after closing: a sublease violating Board and mortgage rules. In fee sale, seller must relinquish immediately or within 5 days thereafter, provided seller deposits $1,000 with his attorney in escrow to insure possession within said period, with the provision that $ 50 per day be paid to the purchaser for each day seller overstays said period. Adjustments, including interest on new mortgage, shall be made as of possession date.
- Seller to maintain the grounds in the same condition as the date of P's inspection, including lawn cutting, leaf raking and snow removal from driveway and walks.
- Seller to turn over to Purchaser at closing all rent securities unapplied in accordance with lease terms, including interest, provided purchaser delivers written indemnity to Seller with respect to any transferred securities.
- Seller represents that the premises are a legal _______-family dwelling (with)(without) garage and if this not the case, Purchaser may cancel this contract and receive a return of the deposit hereunder. Seller will deliver a valid and subsisting Certificate of Occupancy for the Premises and certificates of completion, if required, at closing or affidavit that structure pre-exists requirements.
- Seller warrants (to survive deed) that current use does not violate Certificate of Occupancy.
1) Purchase Money Mortgage [Unless a co-op transaction, try for assignment of existing mortgage and consolidation with new mortgage for balance. Try to have forms appended]:
1) Prepayable
2) No change - or due-on-sale
3) No personal liability
4) Ins proceeds to be used for repair
5) Mortgagee shall not unreasonably withhold consent to improvements which increase the FMV of the premises.
6) Mortgagee shall be given 10 days' notice of default by cert mail and reas opportunity to cure.
7) Violations of record shall not be a violation of the mortgage terms, provided reasonable steps are taken promptly after entry of violations to cure same.
8) Prior to closing, check to see that all of conditions of commitment letter have been satisfied or that documents to do so are cleared prior to closing with underwriter. If Lender requires, is UCC-1 for co-op signed by purchaser on file with County Clerk?
-- Is deal contingent on obtaining financing?
a) Purchaser may want to contact HSH for electronic survey "Mortgage Update" on rates for 150 local lenders for $ 10 for a one- time listing available each week (800) 873-2837.
b) Follow Blumberg's form of Contract of Sale of Co-op Apartment for language as to financing contingency, with definitions of Commitment Letter, etc., but modify same to provide that purchaser may cancel the contract and recover the contract deposit if despite his good faith efforts the loan does not close on or before the date set for the closing or any new date set pursuant to other provisions of the contract.
c) Standard contract provides that application must be made to lending institution (not merely to mortgage broker). Failure so to apply may endanger deposit. Delsak v.Cumella, NYLJ 1/19/93,P. 23,AD 1st Dep.
-- (For sales other than co-ops) Sale to be conditioned on purchaser's ability to procure an assignment to his lender of the mortgage presently a lien provided Seller shall incur no additional costs thereby and provided that at the closing, the Purchaser's lender shall, in writing, absolve Seller from any further liability to it on the mortgage obligation being assigned by Seller's lender to Purchaser's lender.
-- Purchaser shall have the option, exercisable at any time prior to the delivery of the deed, to declare this contract null and void and to receive back his deposit, plus any interest earned thereon, should the seller be the subject of any bankruptcy, reorganization, or insolvency proceeding.
- Seller warrants (to survive deliver of deed) that Seller has filed all required rent registrations; rents per leases are shown on attached schedule are actual collected rents, that none are in arrears for more than 30 days, and none have exceeded maximum rents permitted by applicable laws; Seller has complied with requirements of law and leases; that no lease requires any rent concessions or special work; that tenants pay all utilities, that Seller knows of no proceedings before any court or regulatory body for reduction of same; that there are no senior citizen exemptions and no single room occupancy units (which may be subject to moratorium on renovation).
- Seller to deliver at closing copies of all reports filed by Seller with government agencies, notices sent to tenants, agreements, court orders fixing maximum rents and a schedule of when apartments last painted and prior redecoration.
- Seller warrants# of employees
Actual payroll
Fuel costs for last year
Heating, ventilation, air-conditioning, electrical, security , and plumbing systems and all appliances are in good working order now and at closing and roof not to leak.
- Purchaser shall have the option to void contract and receive return of deposit if within 10 days from the date of this contract he shall have received from his engineer a report of serious structural defect(s) or from his termite inspector a report of termite infestation.
- Seller to warrant that he has no knowledge of building violation(s), or schedule same. Seller shall warrant that building alterations or facade improvements or air-conditioner or window installations are not subject to prior approval of Landmark Commission. Seller to warrant that no assessment will be in effect on date of transfer of title.
- Fix attorney's fee to draw PMM.
- Seller shall provide on or before__________sufficient data, invoices and canceled checks, such that Purchaser's CPA is able to certify the gross and net income from the premises for such periods and in such detail as is normally required by the Attorney General of the State of New York for inclusion in offering plans accepted for filing.
- Adjust also wages, vacation and severance pay and pension rights.
- Purchaser shall with due diligence apply for $ 2,000,000 liability insurance and all-risk property insurance for the full contract price, and Seller agrees that the Purchaser's obligations hereunder are contingent upon such coverages being available regarding the premises, at normal premium rates. In the event that a permanent policy of insurance covering the above risks cannot be secured at the time set for the delivery of the deed, then the Purchaser may declare this contract void and receive a return of its deposit hereunder.
- Purchase money mortgage shall state
a) Holder has no right to foreclose on account of violations if owner uses due diligence in attempting to cure same and to remove same of record.
b) Holder shall not unreasonably withhold consent to alterations which increase the value of the premises.
c) If mortgagor receives notice under IRC Sec. 1445 that certification of non-foreign status, delivered at closing, was false, then mortgagor may offset from succeeding installments of interest and principal a sum equal to 10% of the amount realized by the mortgagee on such transfer; provided that mortgagee shall pay over such offset amounts to the IRS on such installment dates and simultaneously file with the IRS all required withholding tax forms. (See draft of additional language in blank forms file.
- Contingent on termite inspection? engineering report?
- Seller, at or before closing, will deliver to Purchaser an affidavit setting forth Seller's address, taxpayer ID #, and statement that Seller is not a nonresident alien or foreign corporation, partnership, trust or estate.
- Seller, at closing, will deliver a written indemnity and save-harmless agreement, to survive the closing, to the effect that seller is a member in good standing of the RSA, that all required permits are in effect, and that seller will save purchaser harmless against claims by NYC for emergency repair charges and environmental control liens, if the work attributable to such charges and liens was performed or incurred before the date of delivery of the deed. [or escrow a sufficient amount for one year.] and that seller warrants that there are no liens or judgments against him; that he has not been known be any other name within the last ten years; that the liens and judgments, if any, shown in the purchaser's title search are not against him but are against others with names similar to his who resided at addresses different from his.
- Seller will be liable for all transfer and gains taxes payable on NYC Form RPT and NYS Form TP-584 and any flip taxes imposed on this transaction and shall execute and deliver to the purchaser's attorney at or prior to the closing such returns as are required, together with appropriate checks in payment, or, in the alternative, will provide proof of timely payment. Clause to survive closing.
- Seller will have available at the closing of title one identification card with his picture, plus an additional item of identification containing his signature.
- See additional language regarding co-op purchase in File I\ RIDER.PUR
- See language as to Seller's obligations re hazardous materials on separate yellow sheet in blank forms "Contract" file. Seller represents that the premises are not insulated with urea formaldehyde or asbestos and will be free of such substances and free of lead paint..
- (Rural) Seller represents that all driveways and turnaround areas are entirely within the premises and that if said driveways are not within said lot lines, then said driveways are within defined rights of way and easement areas over which Seller has valid recorded easements.
- In ordering co-op lien search, make sure that neither the seller(s) nor the purchaser(s) have been known by any other name within the last 10 years, or search to cover additional names for bank. Arrange that continuation be available at closing. In contract, provide that seller shall deliver, at closing, an affidavit that he has examined lien search and that it accurately reflects all encumbrances against the lease and shares and that he has not suffered or caused any other encumbrances against the shares and lease.
--(Purchase from Estate) Seller shall deliver to Purchaser at Closing
a) a certificate of letters testamentary for John Q. Quimby to act as executors under the will of M. M. Testator,
b) a copy under seal of the death certificate of M. M. Testator,
c) an affidavit of domicile and
d) an estate tax waiver of the State of NY covering the Shares and Proprietary Lease (or federal and State releases of lien, in form for recording, if real estate) and/or an affidavit, in form reasonably satisfactory to the purchaser=s attorney and title insurer to the effect that there are no federal estate taxes payable on the estate. For executor=s affidavit see i\estate.aff.
-- If seller of co-op wants continued possession after closing, see form of Possession Agreement
PRIOR TO CLOSING: Have purchaser make inspection of premises and appliances (if warranty given by seller) to ensure that all is in order.
FOR CLOSING:
- NYS Equalization form is to be prepared by Purchaser=s attorney.
- Mansion tax (1%) due from purchaser on residential purchases for over $1 million.
- Mortgage tax; (not on co-ops, which have sec agreements,, not mortgages): NYS 1.00% in NYC area (with $25 credit for 1 or two family use and 1/4% credit for tax paid by lender) plus NYC 1% for debts of 500K; 1.125% for residential (1-3 fam) of over 500K and 1.75% for over 500K debts.
- Sec. 253 (Tax Law) affidavit for purchaser executing PM mortgage to an individual on a less-than-6-family residence could save 25 cents/$100 additional NYS mortgage tax.
- Closer ordered?
- Insurance policy available at closing?
- Cert cks broken down?
- Note in followups listed in our closing statement the expiration date for the bringing of actions on misrepresentations and warranties of seller which survive the closing, pursuant to the contract, or warranties given at closing.
- Send IN REM card (Owner's Registration Card). See blank forms file under Owners.
- Form 1099 preparer priority: Institutional lender's atty, purchaser's atty, then seller's atty.
-Have all conditions in loan commitment letter been attended to prior to closing?
-SPECIFIC TO CO-OP/CONDO PURCHASES:
- If mortgage contingency is contemplated, explain that application must specify interest rate and terms for proper rejection, if necessary, and that approval is unlikely if responsibility for underlying 1st mortgage equals more than 30% of purchase price for unit or if underlying mortgage will mature within 2 years [Chemical Bank 5/15/91].
- Contract should provide that if Board, subsequent to closing, enacts a maintenance increase which is retroactive to a time before the closing, then the Seller shall pay to Purchaser upon demand an amount equal to that portion of the said maintenance increase which shall be for the period prior to the closing. This provision shall survive the closing by a period of six months.
- Order lien search against current owner, borrower-client, and co-op corp (also against prior owner if owned w/in 6 months) to include UCCs, suits & judgments, fed tax liens, bankruptcies, and mechanics' liens. Title company liability must be not less than cost of unit.
- FOR CO OP CLOSING: lien search complete, prop lease, stock cert, assignment, assumption, secy's cert of B/D consent; manager's letter of no default. UCC-3's available for all loans shown on lien search? Draft letter to lender requesting copy of appraisal.
- FOR CONDO: FIRPTA affidavit from seller.