New construction closing checklist

What are the steps, in order?

1. Read the offering plan and every amendment. The offering plan is the deal. It contains the purchase agreement, the projected budget, the sponsor’s obligations and the closing adjustments. Amendments change all of it, so read the plan as amended rather than the copy handed to you at the sales office.Before signing
2. Confirm the plan has been declared effective. A sponsor cannot close until the offering plan is declared effective, which requires a minimum share of units in contract. Until then your deposit is held under the plan’s escrow terms and the closing date is projected rather than fixed.Before signing
3. Understand which adjustments the sponsor has shifted to you. Sponsor contracts commonly require the purchaser to pay the sponsor’s transfer taxes, the sponsor’s attorney fee, a working capital contribution and a resident manager contribution. These are negotiable only at the sales-office stage and only sometimes, but they must be budgeted from the start.Before signing
4. Confirm the deposit escrow arrangement. Deposits on a New York offering plan are held in escrow under the plan and the Attorney General’s regulations. Confirm the escrow agent, the account, and the conditions under which the deposit is released, because the money sits there for a long time.At contract
5. Track the certificate of occupancy: TCO or final. Many new buildings begin closing on a temporary certificate of occupancy. A TCO expires and must be renewed. Confirm the TCO covers your unit and its floor, that it is current on the closing date, and what the plan says about the final Certificate of Occupancy.Weeks before closing
6. Address mechanic’s lien exposure from the construction. Contractors and suppliers on a just-completed building can file mechanic’s liens after you close. Ask the underwriter for affirmative mechanic’s lien coverage, and confirm the sponsor is delivering contractor lien waivers and its own affidavit.Weeks before closing
7. Confirm the unit’s tax lot and the tax abatement status. A new condominium’s tax lots are created by the declaration, and the assessment on a brand new building is often provisional. Where the building carries a tax exemption or abatement, confirm the application status and the plan’s disclosure about what happens if it is not granted.Weeks before closing
8. Do the unit inspection and build the punch list. Inspect the finished unit against the plan’s description and the sales materials, and record the punch list in writing before closing. The sponsor’s obligation to complete punch list work survives closing only to the extent the plan says it does.1 to 2 weeks before closing
9. Order the title report against the sponsor and the construction loan. The search runs against the sponsor entity and the building loan. Confirm the construction mortgage is being satisfied or partially released as to your unit at closing, because a blanket building loan that is not released remains an exception on your unit.Weeks before closing
10. Confirm the sponsor’s closing notice and the deadline mechanics. Sponsor contracts set the closing on notice, often with a short window and a time-of-the-essence provision running against the purchaser only. Calendar the date the notice creates, and confirm your loan can actually fund inside it.On sponsor notice
11. Verify the wire and close. Verify wire instructions with the sponsor’s attorney by telephone at a number you already had. Sponsor closings are high volume and a purchaser wiring into a redirected account is a known pattern in new development.Closing

Which documents do you need?

• Offering plan with every amendment, and the purchase agreement contained in it
• Declaration of condominium and the recorded floor plans
• Amendment declaring the plan effective
• Escrow agreement and confirmation of where the deposit is held
• Temporary or final certificate of occupancy covering the unit
• Sponsor’s deed and the sponsor’s entity authority documents
• Contractor lien waivers and the sponsor’s mechanic’s lien affidavit
• Partial release of the building loan mortgage as to the unit
• Owner’s policy with mechanic’s lien coverage where the underwriter will write it
• Punch list signed by the purchaser and the sponsor’s representative
• Working capital and resident manager contribution statements
• TP-584, RP-5217NYC and the NYC transfer tax return, with the sponsor’s taxes allocated as the plan provides

Which searches does this transaction call for?

• Title search against the sponsor entity and the chain into the condominium
• Building loan and construction mortgage search, with the partial release for the unit
• Mechanic’s lien search against the property, the sponsor and the general contractor
• Judgment, federal tax lien and bankruptcy searches against the sponsor entity
• DOB search covering the new building permits, sign-offs and the certificate of occupancy history
• OATH (formerly ECB) violation search against the construction work
• Tax search on the newly created unit lot, including any abatement application
• Patriot search against the sponsor and the purchaser
• UCC search against the sponsor entity

What else should you read before closing?