Selling New York City new developments to New York buyers is challenging enough, but selling those same units to buyers from outside of New York can be completely confusing when other states and foreign countries have their own laws about buying and selling real estate.
The rules for advertising or selling real estate are more onerous in some states, like New York and New Jersey, than others.
“The real issue is certain states require [an] attorney general’s approval in that state for the offering plan before you can advertise in that state,” said Clifford Finn, managing director of new development marketing at Citi Habitats. “You have to file your plan and it can be costly.”
In order to market or sell new construction or a rehabilitation project from somewhere outside of the state to New Yorkers, the sponsor has to submit plans to the New York attorney general’s office, which can cost several tens of thousands of dollars.
Similarly, in New Jersey, the state’s real estate commission administers and enforces the Real Estate Sales Full Disclosure Act, which “regulates the marketing and sale in New Jersey of real estate interests located in other states and countries,” according to the state Web site. “Persons who wish to market such properties in New Jersey must first register their projects with the commission.”
Since there is no one public portal with information about all jurisdictions, and laws vary from state to state and country to country, real estate pros suggest developers, and buyers themselves, consult local attorneys in the areas where they are selling or buying property.
Some jurisdictions may not have any regulations, while others require more documentation.
To conduct sales in another state, an agent has to be licensed in that state, said real estate attorney Terrence Oved of Oved & Oved.
Meanwhile, to just advertise or test the market for a project in New York, developers have to submit an application, a so-called Cooperative Policy Statement 1, to the attorney general’s office along with a $225 filing fee. If the application is approved, the state then has to okay the actual ads.
Should a developer want to proceed with sales, he needs to file the offering plan, which can cost up to $30,000, depending on the total offering price, Oved noted.
According to the Web site for the New York attorney general, its real estate financing section “requires the filing of prospectuses or offering circulars, which must
disclose information concerning all material aspects of the offering.”
Patricia Warburg Cliff, a senior vice president and director of European sales for the Corcoran Group, finds the process of selling units in a new development across state lines complicated, though she noted that a resale by an individual outside of New York to a New Yorker does not need to be registered with the state.
Should someone sell units in New York without receiving the necessary approvals from the attorney general’s office, the state can force the developer to file the proper forms, render the sales invalid and sue for damages. However, most people do not go afoul of the law, Oved said, because they work with knowledgeable attorneys.
Even murkier is the overseas buying and selling of real estate.
“Buyers from other states can buy in our developments subject to the offering plan in New York City. However, selling to international buyers requires that all paperwork be handled through an intermediary New York City lawyer familiar with international real estate laws,” said Andrew Gerringer, executive vice president in charge of the development marketing group and investment sales division at Prudential Douglas Elliman.
“I find the whole process unclear and that very few people understand the rules and regulations. There should really be some clear policy easily obtained about this through the AG’s office.”
As for selling real estate in another country, Oved noted that “the protections that are in place in the United States are not as prevalent overseas.”
Elizabeth Stribling, president of Stribling & Associates, echoed his comment: “Amazingly, there are no licensing laws in Europe.”
In France, where Stribling also conducts business, an American firm cannot open an office, she said. But, she added, an American agent can work through a local agency on a referral-fee basis to handle properties or customer referrals.