The New York City residential real estate market has been heating up since the beginning of 2021. What are condominium and cooperative sponsors doing to keep that momentum going? Some sponsors are offering incentives to prospective purchasers––to induce them to buy apartments. Incentives may include Sponsor-paid common charges, real estate taxes, transfer taxes and/or mansion tax. Such incentive offers are either made to the general public (“Across-the-Board Incentives”) or arise through negotiations with individual purchasers.
Across-the-Board Incentives must be disclosed in an offering plan or a duly filed amendment before the sponsor is permitted to advertise the incentive to the general public. Advertising includes newspaper ads, information on websites and social media, word of mouth through the real estate brokerage community, or any modality that conveys the incentive to buyers, other than by individual negotiations. All written advertising must contain a legend prescribed by the New York State Attorney General.
Individually negotiated incentives do not require an amendment to the offering plan, provided that the offering plan properly disclosed the Sponsor’s right to negotiate the sale terms with individual purchasers. Such incentives must flow exclusively from direct discussions with the purchaser, and not from advertising. This approach gives the sponsor flexibility to incentivize prospective purchasers on a case-by–case basis, or until an amendment is filed to offer an Across-the-Board Incentive.
Sponsors who are considering offering purchaser incentives need to understand the pros and cons of the various ways of offering them. For more information, please contact the Condominium and Cooperative Group at Seiden & Schein P.C., the law firm for sophisticated developers.
Alvin Schein aschein@seidenschein.com
Adam A. Levenson alevenson@seidenschein.com
Jane Rosenberg jrosenberg@seidenschein.com
Hillary Potashnick hpotashnick@seidenschein.com
Luisa Gutierrez lgutierrez@seidenschein.com
David Lu dlu@seidenschein.com