What Is a New Construction Punch List in NYC Real Estate?
What is a punch list when it comes to new construction in NYC? Are sponsors obligated to finish a buyer’s punch list within a certain time frame? We’ll explain everything you need to know about new development punch lists and show you two sample punch lists in this article.
What Is a Punch List?
A punch list is a list of improvements, repairs and touch-ups that a new development condo or co-op buyer wants the sponsor to complete before closing or soon after closing.
Usually in new construction there are 2 walk-throughs of the apartment before closing. The first walk-through is to develop a punch list and the final walk-through is to make sure everything on the punch list is done.
Pro Tip: Are you new to buying a new construction home in NYC? Make sure you work with an experienced buyer’s agent who can help guide you through this complex and unique process. Remember that you’ll be responsible for paying the sponsor’s transfer taxes unless you can negotiate!
Are Sponsors Obligated to Complete the Punch List?
Sponsors are only legally required to build a new construction project up to code per the co op or condo offering plan (i.e. typically referenced in a section called Rights and Obligations of Sponsor — Construction Obligations). However, sponsors are also business people who want their customers to be happy, and the larger developers have significant brand equity to protect. As a result, a punch list is referenced in most new development purchase contracts:
Sponsor shall make a good faith effort to address any punch list items within a reasonable period of time after closing.
Commercially Reasonable
Does the above language sound obligatory to you? Sponsors only need to make commercially reasonable efforts to complete the buyer’s punch list within a reasonable amount of time. In fact, buyers are often required to sign an official Inspection Statement at the walk-through. This Inspection Statement will often contain the below language:
I understand that work indicated on the inspection sheet shall be performed in accordance with the practice of the industry. In the event of a dispute, Sponsor’s contractor, architect or engineer shall determine whether or not such work was performed according to such standard and his or her decision shall be binding on the parties hereto.
You agree to complete all items listed on this inspection statement within a reasonable period of time following closing to my Unit, subject to delays for work or materials beyond your control.
As a result, you truly are relying on good faith that the sponsor will complete any touch-ups you’ve requested when buying a new construction home in NYC!
Pro Tip: Make sure you understand the critical differences between a condominium conversion vs new construction in NYC. A condominium conversion, especially in a smaller building, can carry significantly more risks if the conversion was more of a paint job vs a complete rehabilitation.
Disagreements over Punch List Additions
New development condo or co op buyers should always ensure that the real estate listing agent or another sponsor’s representative is present at the walk through. You’ll want to agree on the punch list with the sponsor’s representative and have both of you sign or initial the punchlist.
Buyers should be as complete as possible as the listing agent may not allow you to add additional items to the punchlist down the road.
Furthermore, the items a buyer wishes to add to the punch list should be reasonable in order for the sponsor’s representative to agree. For example, a request for a new bathtub to be installed because you aren’t the biggest fan of the original design would probably be rejected. However, if there is extra paint on the window frame that’s a result of poor workmanship will most likely be added to the punch list and fixed.
Here is an example of what a sponsor’s representative responded with after a buyer asked to add some additional things she thought off after the punch list had already been created:
Thanks for your notes. Unfortunately, this is not the way we do things. You are not able to add things to the list. I made some of the changes on the attached sheet. The kitchen was designed as it is now. Any changes that we are trying to make — is a try — hence the word ‘can’. There are indeed design flaws. We will do what we can.
Pro Tip: Are you buying a new construction co-op apartment? It’s certainly more rare to see new developments these days structured as cooperatives, so please be careful in analyzing why the sponsor chose this route. Most likely, it’s because the sponsor wants to pass off a large mortgage on the building to the new co op owners. If the co-op has already started operating independently, make sure your bank or attorney submits a comprehensive survey questionnaire for cooperative to the managing agent. If you’re buying an apartment in a self-managed co-op building, then you’ll need to submit the questionnaire directly to the co op board.
Read the Full Article: https://www.hauseit.com/new-construction-punch-list-nyc-explained/
Disclosure: Hauseit (https://www.hauseit.com) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).
