Q: It seems that real estate attorneys are asking for more and more “due diligence” materials when representing a prospective purchaser of a co-op or condominium apartment. What are the “customary” due diligence materials that an attorney will ask for?
A: Real estate attorneys conduct a due diligence investigation in order to give prospective purchasers of co-op and condominium apartments a better understanding of the overall condition of the property. This includes, for example, determining what capital projects will be undertaken by the co-op/condominium in the future, when maintenance/common charges will increase, whether there are any anticipated special assessments and if there are any “quality of life” issues in the building.
The customary due diligence materials that a purchaser’s attorney will request include the condominium or co-op’s: (i) board minutes (an attorney will generally schedule an appointment to review the board minutes with the building’s managing agent); (ii) offering plan and all of the amendments to the offering plan; (iii) house rules and by laws; (iv) a building questionnaire; and (v) the two most recently audited financial statements.
Important Tip: Real estate brokers should anticipate that the purchaser’s attorney will request the above-referenced due diligence items. Accordingly, in order to expedite the transaction, real estate brokers should request the customary due diligence materials from the seller or managing agent as soon as possible.
The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP