How to read an offering plan in twenty minutes

The offering plan is the only document in a new development purchase that is legally required to tell you the truth. It is also long enough that most buyers never open it. Your attorney will read all of it. Here is how to get the important parts yourself in one sitting.

Start with the schedule of units and common charges. Find your exact line, not the building average. Confirm the square footage the sponsor is using, the common charge allocation, and the projected real estate taxes. Projected is the operative word.

Go to the budget for the first year of operation. Look at staffing, utilities, insurance, and reserves. Then ask whether that budget looks like a building that is actually running. First year budgets in new buildings are often optimistic, and the correction shows up as a common charge increase in year two or three.

Find the tax section. This is where the abatement is described. Program, start year, term, phase out schedule. If the projection assumes a benefit that has not been finally approved, the plan will say so, and that language matters.

Read the sponsor obligations and the completion provisions. What is the sponsor required to deliver, what are the outside dates, and what happens to your deposit if they miss.

Check the special risks section. It is usually near the front and it is written by the sponsor's counsel because they have to disclose. This is the most honest page in the document. Land lease, litigation, unbuilt amenities, zoning conditions, and unusual tax exposure all surface here.

Finally, look at the amendments. A plan is a living document. The amendments are where price changes, budget revisions, and delivery delays get recorded. If there are many amendments, read them in order and the story of the project becomes obvious.

Twenty minutes of that and you will know more about the building than most people who tour it. Then hand the whole thing to a real estate attorney, because the parts you skipped are the ones that show up at closing.