When a condominium developer reaches the point of offering units for sale to the public, the developer’s thoughts often run more toward making a sale and getting the project on the path to profitability than they do to some of the finer points about the condominium property that may adversely affect interest in purchasing units. It’s tempting to describe the property as positively as possible rather than to point out a potential problem.
This is precisely why New Jersey’s Planned Real Estate Development Full Disclosure Act (PREDFDA) requires that condominium developers register an offering plan with the Dept. of Community Affairs prior to offering any of the units for sale. The offering plan includes a Public Offering Statement (POS). Of course, the real value of the POS is to potential purchasers, so developers are required to make copies of the public offering statement freely available to prospective purchasers prior to any sale contract.
What Has to Be in a POS?
In general terms, a POS has to disclose “fully and accurately” the development’s characteristics and “all unusual or material” information affecting the development. The statute specifically requires that the POS include:
- Developer’s name and principal address
- Narrative description of the development, including the number of units in the current offering and the number planned to be sold
- Any contracts for management, recreational area leases, or similar agreements affecting access, maintenance or use of the development, including narrative statements of how each agreement affects a purchaser
- Any relationship that may exist between the developer and the entity managing the development
- The significant terms of encumbrances, liens, restrictions and easements affecting each unit, including conditional uses and other regulations
- A statement of all current taxes and any current or proposed special taxes or assessments
- Relevant information about the community (hospitals, recreational facilities, streets, sewage disposal facilities, water supply among other examples)
- Details about existing and proposed amenities (such as the completion date, cost, who is responsibility for the building)
- The proposed budget for operating and maintaining the common areas
- A prominent notice to purchasers that they have seven calendar days to cancel a purchase contract
- Any additional information that the Dept. of Community Affairs deems necessary to achieve full and fair disclosure
Form and Use of POS
The form of the POS is prescribed by the Dept. of Community Affairs. Approval is required before any portion of the POS can be underscore, italicized or otherwise emphasized.
In keeping with the goal of full disclosure, developers can’t publicize a POS until after it’s approved, and once it is, they have to use the entire approved version, not just parts of it. Similarly, no changes can be made to the POS after it’s approved, unless the change is also approved.
The fact that the Dept. of Community Affairs approves the POS does not justify any statement indicating that the Dept. approves the development project itself.
Get Legal Help Drawing Up Your POS
Disclosure in the POS is a major weapon in the developer’s battle against claims of fraud, deception, etc. in the sale of condominium units. The more information that a developer puts in the POS, the less likely that a unit purchaser will end up disappointed enough in the condominium to sue the developer; this means that it’s in the developer’s long term interest to disclose virtually any information that a “reasonable purchaser” might find relevant to the decisions of (a) whether to purchase a unit, and (b) for how much. An experienced condominium attorney can help you identify what to include and ensure that the entire POS is written simply and clearly enough to get the approval of the Dept. of Community Affairs.
It really helps to have an objective view of the development and the POS. Call Barnes Law Group, LLC, today. We do the right thing, the right way for the right reasons. We have offices located near you in North Wildwood and Egg Harbor Township.