Once you have an accepted offer in New York, it’s customary for the seller’s attorney to send a draft contract to the buyer’s attorney to review and negotiate. Typically both sides will have a custom rider to the standard contract with points they wish to negotiate, and sometimes the attorneys will negotiate off of one contract rider.
We’ll go over a sample purchaser rider to contract of sale in New York in the article below, and explain what certain terms and phrases mean, what’s typical and what you should expect depending on the competitiveness of the listing.
A purchaser rider to the contract of sale in New York is essentially an addendum to the standard condominium contract where the buyer’s attorney includes some additional, custom terms to the contract.
In New York and NYC, there’s an unwritten rule between real estate attorneys to leave the standard condo contract be, and to negotiate custom terms via condo contract riders.
Often times attorneys who don’t specialize in real estate locally won’t realize this and will try to make edits to the boiler plate language in the standard condo contract.
Who’s responsible for creating the purchaser rider?
Keep in mind that in New York, it’s illegal and against licensing law for real estate agents to edit, draft or review contracts or really any legal documents as that would constitute the unauthorized practice of law.
As a result, in New York both the buyer and the seller need their own, separate attorneys for contract and contract rider review and negotiation. Additionally, the buyer’s attorney is typically responsible for building due diligence for condos and co-ops, as well as ordering and reviewing any title or lien searches.
In New York, sellers typically opt to pay a $500 credit to the buyer in lieu of completing the seller property disclosure form in contrast to other states where sellers are often required to fill out a property condition disclosure form.
However, contracts are highly negotiable in New York, and depending on the competitive situation, a buyer may be able to make the seller make certain representations about the property in the contract rider.
For example, you might see sample language like the below regarding affirmations from the seller regarding unapproved alterations, board fines, mold etc.
2. Sellers represent to Purchaser as follows (such representations are true as of the date hereof and shall be true as of the date of closing):
2.1 To the best of Seller’s knowledge all material alterations, additions or improvements to the interior or exterior of the Unit made by Seller were made with any required consent of the Condominium and any applicable government authority. To the best of Seller’s knowledge, Seller has received no written claims against Seller made by the Condominium or by any governmental authority for failure to comply with the rules of the Condominium or of any applicable law regarding alteration of the Unit. To best of Seller’s knowledge, there is no present requirement to remove any alterations, additions or improvements. Seller will not at Closing be indebted for labor or material that might result in the filing of a notice of a mechanic’s or materialman’s lien against the Unit. Seller shall not make any alterations to the Unit between the date hereof and the date of Closing except to keep the Unit in good repair. It shall be a condition of Purchaser’s obligations to close under this Contract that any open permits filed with the New York City Department of Buildings shall be signed off, and a Letter of Completion or its equivalent issued.
2.2 Within the past 12 months, Seller has made no written complaints to the Board of Directors or the managing agent concerning offensive conduct, excessive noise, environmental issues (including but not limited to mold, lead paint and asbestos) lack of heat or hot water, low water pressure, rodent and/or other bug infestation (including bed bugs), banging pipes or odors emanating from other apartments or other areas of the building or any other disturbance affecting the Premises or the Unit.
2.3 The Sellers represent that in the past 12 months they have not had the Unit treated for toxic mold, bed bug or other infestations; and they have no actual knowledge of any bed bugs or other infestations presently in the Unit. The Unit shall be delivered free of any toxic mold, rodent, bedbug or insect infestation.
2.4 At the time of the execution of this Contract, neither Sellers nor Purchasers have filed for protection under any federal bankruptcy law.
2.5 Seller has not received written notice of pending litigation or claim against or concerning Sellers or the Unit that would adversely affect the Premises or Sellers’ ability to convey same to Purchasers hereunder.
2.6 Seller is not in any uncured default on any mortgage on the Property and this transaction is not a “short sale” as that phase is customarily used in the industry.
2.7 In the past 12 months, Sellers have no written notice of any default in keeping, observing or performing any term, covenant or condition on Sellers’ part to be observed or performed under the Condominium’s By-Laws or House Rules. All liens filed against the Unit for unpaid common charges, assessments or other condominium fees will be paid off prior to or at closing, if any. Seller is responsible for obtaining a satisfaction and/or release in recordable form to be delivered to the title company at closing for any such lien filed against the unit.
2.8 Sellers have no actual knowledge of any condition in the Unit that the Condominium is responsible for repairing or for maintaining which has not been repaired, maintained or corrected in all respects.
2.9 Notwithstanding anything to the contrary set forth in Paragraph 2 of the printed form of contract, Seller represents that the kitchen appliances, air conditioning equipment, heating equipment, electrical systems and outlets, and plumbing fixtures, to the extent that the responsibility to maintain same is the Seller’s and not the Condominium’s pursuant to the By-Laws, shall be in working condition at Closing. If any of the appliances or utilities affecting the unit which are not Seller’s responsibility are not working or defective between now and the date of Closing, Seller agrees to give written notice of such condition(s) promptly to Managing Agent or Condominium Board.
2.10 During the past 12 months to the best of Seller’s knowledge there have been no water leaks into the Unit from the exterior of the Building or from any other Unit, and Seller has not received any written notice that there are or have been any such leaks, or any leaks purportedly emanating from the Unit.
There is an endless variety of additional language and protections that a buyer’s attorney can negotiate into a purchaser rider to contract of sale in New York. As you’ll see in the example contract rider language we’ve included below, they range from something as innocuous as receiving appliance instruction manuals at closing to making sure the buyer can cancel the contract if the bank doesn’t fund their loan due to issues with the unit or building.
The latter is equivalent to having a funding or failure to fund contingency built into the mortgage contingency, at least as it relates to building or unit specific issues which might cause a bank to not fund a loan.
Remember, all of this is ultimately negotiable, and it all depends on the negotiating leverage that each party has given the competitive dynamics of the listing.
3. The timely delivery of a Report of Title to Seller’s attorney shall be considered a statement of all defects, objections and/or exceptions noted therein.
4. The venue for any action or proceeding shall be a court in New York County.
5. Any time periods contained in this Contract which contain the language “from the date hereof or the “date of contract” or similar effect shall be deemed to mean from the date that a fully executed counterpart of this Contract is delivered to the office of Purchasers’ attorney.
6. In the event the Purchaser obtains a written loan commitment as provided herein, and the Lending Institution subsequently rescinds such written commitment, or refuses to make the loan, then Purchaser shall be entitled to cancel this Contract of Sale, and have the Down payment hereunder return to him promptly, only if said rescission or refusal to fund the loan is by reasons solely pertaining to the Condominium and/or building.
7. This Contract shall terminate upon the death of any one or all persons comprising Purchaser and the Downpayment shall be refunded to the Purchaser upon written notice given to Seller within 15 days of the date of death. Upon making such refund and reimbursement, neither Party shall have any further liability or claim against the other hereunder.
8. At the Closing, Seller shall deliver to Purchaser all warranties, instruction manuals, service manuals and similar items with respect to the appliances and building systems in Seller’s possession and actually transferable, and keys for all external and internal door locks on the Unit, the entrances to the Building and the mailbox that are in Seller’s possession.
9. To the best of Seller’s knowledge, there is no material damage to any floor or wall currently concealed by furniture or area rugs.
10. As a courtesy to the Purchasers, and not as a material obligation, Seller shall promptly deliver to Purchaser any and all written notices it receives from the Condominium or the Managing Agent regarding the Condominium or the Unit between the date hereof and the date of Closing. Failure to deliver such notices shall not be deemed a material breach of this Contract nor entitle Purchaser to adjourn or delay the Closing. Seller has received no written notice of any imminent increase compared to the amount set forth in the Contract in common charges or assessment to be implemented.
11. This Contract may be executed by facsimile or PDF and in counterparts, each of which shall be an original, all of which shall constitute but one and the same instrument.
12. Seller shall remain liable to the Buyer (should buyer be charged for such) for any reversal or reduction in a tax abatement applicable to the Unit, after closing, as a result of the Seller not qualifying for the full abatement, e.g. as a result of seller not being a primary resident of NYC, during the time of her ownership. The provision of this Paragraph shall survive the closing for one (1) year.
13. Purchaser’s obligation hereunder are subject to the unconditional waiver of right of first refusal of the board of managers of the Condominium. In the event the Board imposes any condition on the Purchaser’s approval, inducting but not limited to providing funds in escrow, Purchaser shall have the right to cancel the Contract. In the event Purchaser chooses to cancel the Contract, Seller shall promptly return the Downpayment to Purchaser and neither party shall have any further rights, responsibilities or obligations towards the other.
14. Purchaser’s obligations hereunder are conditioned upon there being in existence a valid and non-expired Temporary Certificate of Occupancy, or a Permanent Certificate of Occupancy.
15. As required under the recently enacted Truth-In-Lending Act and Real Estate Settlement Procedures Act, the Seller acknowledges that the Purchaser’s lender is required to deliver a Closing Disclosure to Purchaser at least three (3) business days before the closing and in practice may require closing figures from Seller and Purchaser seven (7) to ten (10) days in advance of Closing. Seller agrees to cooperate with Purchaser and Purchaser’s lender by responding timely to requests for adjustments, payoff figures, check requests and other figures required by Purchaser’s lender in order to complete a dosing disclosure for any scheduled closing. The parties agree that any closing disclosure that was delayed by Seller’s or Corporation’s failure to timely provide closing figures and resulted in a delay of Purchaser’s lender to timely issue a closing disclosure for a scheduled closing shall not be considered a default of Purchaser. Seller shall cooperate with Purchaser’s Lender by signing any documents reasonably or customarily requested by Purchaser’s lender in order to close.
16. Seller and Purchaser agree that the Coronavirus (COVID-19) pandemic is impacting real estate transactions, transaction related service providers and consumers. There is a possibility that transaction related service providers such as lenders, title/abstract companies, appraisers, home inspectors and attorneys may he providing limited or no services, as a result of COVfD-19 issues. COVID-19 issues may include but are not limited to: emergencies declared by the government, travel restrictions, mandatory closures, quarantine, exposure to or contraction of COVID-19. If a COVID-19 issue should arise making compliance with the terms of the Contract impossible or improbable as a result of such COVID-19 issue, Seller and Purchaser agree to extend all deadlines in the Contract by ten (10) business days after the end of the CQVID-19 issue. Purchaser shall not be required to close on the Unit unless and until the Condominium shall permit the Purchaser to move into the Unit.
17. Should the Purchaser desire to request an Assignment of Mortgage from the existing lender of the Seller, the Seller agrees to comply with the Purchaser CEMA process. The Purchaser and Seller agree that any cost savings as well as expenses (including but not limited to any legal fees charged by Seller’s lender and the recording fees related to the issuance of the assignments) shall be shared between the parties equally. The Seller shall not incur any obligations or liabilities related to the Purchase CEMA. This shall not delay Closing.
Pro Tip: Check out our Purchase CEMA Savings Calculator to learn more about how much in closing costs you can save with a Purchase CEMA mortgage.
Even though anything is technically negotiable, and can be asked for in a draft contract rider by your attorney, it’s also nice to be cognizant of what’s reasonable and standard. After all, it can’t hurt to play nice with the opposing party whom you’re trying to negotiate an ideally win-win deal with.
Many of the representations that the seller is asked to make in sub-section “Rider language for seller property disclosures” are a bit unusual, but also not unreasonable for a seller to agree to. However, depending on the competitive situation, many sellers may simply opt to move on to the next buyer who won’t ask for something like this.
That’s because sellers are used to not having to make any representations, and being able to simply give the buyer $500 as a closing credit in lieu of filling out a seller property disclosure form.
Part 6 in sub-section “Additional protections for the buyer” is unique in that it provides not just a mortgage contingency, but essentially a partial funding contingency all the way until close.
We say partial because if the bank doesn’t fund the loan on closing day because of some factor related to the buyer, such as the buyer losing his or her source of income prior to closing, then the buyer would still be in default and would lose his or her earnest money deposit.
Part 10 is actually a bit non-standard, in that it asks the seller to deliver all notices from the condo board and building management to the purchaser, though not doing so wouldn’t be considered to be a major breach of the contract. However, the seller affirms that they haven’t received any notification of an imminent common charge increase. This is something that most sellers won’t be used to having to testify to.
Part 17 is interesting because it pre-determines the split of the cost savings as well as the expenses of doing a purchase CEMA. 50/50 is not an uncommon split. It’s also helpful for the seller to see language protecting them from any liability as a result of the purchase CEMA process.
