In the ordinary scenario, the seller’s attorney emails the contract to the buyer’s attorney within hours of receiving the broker’s deal sheet. The buyer’s attorney then sends comments and a rider to the seller’s attorney and then the lawyers hammer out the contract terms. In most cases the contract could be signed and delivered within two or three days of the issuance of the deal sheet.
But wait. Slow Down! Something has to happen before the contract is signed. That something is the necessary evil called “Due Diligence”. The buyer rightfully wants to know what they are buying into. Is the co-op a defendant in an uninsured lawsuit? Are there lot line windows in the bedroom which could be sealed up? Is there enough of a reserve to fund that major façade work which needs to be done next summer? Has there been a bed bug problem? The list goes on and on.
One of the basic starting points for the due diligence is the offering plan and its amendments. Quite often the sellers simply don’t have the plan and those that do rarely have all of the amendments. In that case, the plan and all amendments have to be obtained from the managing agent at a cost of a few hundred dollars and a few days.
In the meantime, the brokers are whispering and sometimes yelling “TIME KILLS DEALS” and soon enough everyone’s hair is on fire.
In an effort to ease the pressure, some companies have been putting copies of the plans they do have on line. TitleVest is one and they have a rather good system. They offer a ninety (90) day look see for free and a hard copy option for about $150.00. The searching is easy and I applaud Titlevest for its clarity of use. On another note, they also have the best system for creating ACRIS forms that I have come across.
The Attorney General’s Office (where all the offering plans are filed!) also has a database related to Offering Plans. While I take my hat off to the AG’s office for doing this, I must say the site is a disappointment. It’s just so 1.0. Like a rotary dialer in this fast paced digital world. It is tricky to use (you need to either know the plan ID which is rarely readily available, the sponsor’s name or the address in the exact way the AG’s website can read it) and even after you finally get to the plan it simply doesn’t provide what is needed.
Instead of providing complete copies of the plan, the site simply provides summary information. As to amendments, the site only provides the highlights (i.e. if there was a change in the escrow or an increase in the maintenance). This can be helpful in situations where an amendment is missing and the purchaser’s attorney needs to know the import of that particular amendment but it really does not substitute for the entire plan.
I think the AG’s office should bite the bullet, get with the program and offer entire plans for on line viewing and downloading. They could easily start with current plans by requiring Sponsors to file electronic copies of the plans and all amendments. This would obviously not help with respect to plans that need not be amended but it would go a long way to accelerate the “due diligence” delay.