No matter whether you are a first time home buyer or veteran repeat purchaser chances are you have been mentally preparing for the deluge of paper that accompanies this major purchase. The sheer magnitude of documents is understandably overwhelming. Document after document is slid across the shiny, polished conference table in your attorney’s office. At a certain point you become automated; sign here, initial there—a few hours later and you may have just signed your first born child away. Yet, when purchasing a condominium or townhouse keep your wits about you and break out your reading glasses because there is one document you want to read—the Public Offering Statement.
A developer of a community development is required under New Jersey’s Planned Real Estate Development Full Disclosure Act to register the planned development with the Division of Housing and Development in the State Department of Community Affairs. In connection with its registration, the developer must also submit a proposed Public Offering Statement. Once approved, the Public Offering Statement must be freely available to all prospective purchasers prior to the closing of the unit.
Public Offering Statements can be daunting, spanning perhaps hundreds of pages and more often than not written by attorneys flexing their legalese muscles. However, they contain a wealth of information that will prove invaluable to any prospective purchasers’ decision making process. For instance, beyond the information you would expect to find, such as the developer of the project, the number of units, and a description of the planned community, Public Offering Statements are required to contain, among other items, the following information:
- Whether portions of the community will be reserved for leasing and/or rentals;
- Any encumbrances, easements, liens, or other restrictions on the property including local zoning or related regulations;
- A statement of existing taxes;
- Information regarding the surrounding community including information about local hospitals, health and recreational facilities, schools, etc.; and
- A proposed budget for the operation and maintenance of the common or shared elements of the condominium development.
Additionally, Public Offering Statements typically have numerous exhibits, including the master deed and association bylaws. All of these documents provide a prospective buyer (and even current residents) with invaluable information about the development. The master deed will describe in detail the division of common and limited elements versus unit owner property, the metes and bounds of the community, as well as each unit owners’ percentage of interest in the common elements, among a multitude of other pertinent information. The association bylaws are in essence the “constitution” of the development. The association bylaws establish and control the governing body of the development, typically referred to as the board of trustees or some similar variation. The bylaws establish how members of the board are elected to office, how disputes in the community are handled, regulate board and community meetings, and govern what powers are vested to the board.
In everyday typical life, the nitty-gritty details contained in the Public Offering Statement, master deed, and bylaws are overlooked. Yet, these details become highly relevant and unquestionably important should your community discover construction defects. Are you experiencing water infiltration around your windows or exterior doors? The first question you need to figure out is: Whose responsibility is it to fix the windows and doors? Not sure? The answer is in the Public Offering Statement and its exhibits including the master deed and perhaps the association bylaws. Has your association discovered widespread defects with the development’s stucco or other façade materials? Depending upon the extent of damage, repair costs could be in the hundreds of thousands of dollars or more. One method community association’s pay for repairs is by levying special assessments on the unit owners to cover the costs. Not sure how your community handles special assessments? Go to the bylaws. The bylaws will spell out in detail the procedures an association’s board must follow, including voting requirements, in order to levy a special assessment on the unit owners. As in all aspects of life and the law, it will behoove you to know the rules and your rights.
The information contained within these tomes will be your guiding light while living in a community development. So whether you are a prospective buyer or a current unit owner, grab your reading glasses, and get your hands on the Public Offering Statement.