It is extremely important that the prospective purchaser of a condominium unit become aware of the condominium Contract of Sale, which differs in many aspects from the contract pertaining to the purchase of a single-family dwelling.
Contracts for the purchase of condominium units contain various terms, clauses and conditions unique to this type of residential unit. Given the basic differences between condominium ownership and single-family home ownership that is not surprising, however many purchasers neglect to review condominium contracts carefully and can be surprised at the distinct clauses.
A typical agreement for the purchase of a condominium unit will initially identify the seller and purchaser as well as the condominium building, unit number and percentage of undivided interest in the common elements to be conveyed to the purchaser. The agreement will also set forth the purchase price and the amount of the down payment required by seller.
The contract for a newly constructed condominium unit will also provide that the seller shall provide purchaser, at purchaser's sole expense, with a policy of title insurance. The standard contract used today for the re-sale of a residential condominium unit contains a provision providing that the seller shall, at seller's expense, furnish purchaser with a title insurance policy covering the premises.
In effect, therefore, the initial purchaser of a condominium unit may end up paying title insurance charges twice, i.e. at the time of purchase from the developer and at the time of sale to a third party purchaser.
Another unique clause contained in most condominium contracts provides that the seller will furnish the purchaser with a survey of the condominium building together with an affidavit, made by someone with knowledge, that there has been no material change in the state of facts as shown on the survey. Purchasers are not provided with a new survey of the premises.
Another requirement imposed by the contract, which is unique to the sale of condominium units, will be the obligation of the seller to provide the purchaser with a certificate of architectural compliance from the board of managers of the condominium together with a certificate of assessment status from the board of managers.
The certificate of architectural compliance will certify that the unit complies with architectural standards set forth within the declaration of condominium and the certificate of assessment status will provide that all regular and special assessments on the unit are paid to date of closing.
Most purchase agreements for newly constructed condominiums require that the purchaser execute a power of attorney in favor of the condominium's board of managers. This power of attorney will permit the board of managers to acquire on behalf of all owners of units in the development any unit whose owner desires to abandon a unit, any unit which shall be the subject of a foreclosure or other type of sale or any other unit as determined by the board of managers.
This power of attorney enables the board of managers to protect the development by obtaining title to distressed units. The board of managers will also be granted the right to convey, sell, lease, mortgage or otherwise deal with any unit so acquired on terms to be negotiated by the board of managers.
The form of contract used by most condominium developers requires that the purchasers reimburse the seller for the cost of real estate transfer taxes, currently at a rate of $9 for every $1,000 purchase price in Erie County. On resale, the contract will usually call for the seller to pay the cost of this transfer tax.
As with title insurance charges, the initial purchaser of a condominium may be subjected to paying these charges twice -- once on acquisition from the developer and again on transfer to a third party.
Also, the contract for a purchase of a newly constructed condominium unit will usually contain a provision whereby purchaser agrees to complete and execute New York State Real Property Gains Tax forms utilized to establish the liability of the seller for the New York State Real Property Gains Tax.
The New York State Gains Tax is a 10 percent tax on the gain derived from the transfer of real property where the consideration for the transfer is one million dollars or more in the aggregate.
The gains tax is an obligation of the seller and will be paid at the time of the closing and recording of the deed. Purchasers must complete and execute a form to be submitted with seller's gains tax application prior to closing.
Brad F. Randaccio, Esq. is a partner with the law firm of Saperston & Day, P.C. practicing general corporate, real estate and condominium law.