‹ Back

Buying a New Construction Condo in NYC: What You Must Know About Sponsor Sales

 

        New construction condos offer the allure of modern design and luxury amenities, but buying directly from a sponsor in New York City comes with unique legal and financial complexities that do not arise in a typical closing. Whether you are a first-time buyer or an investor, it is essential to understand how sponsor sales differ from standard resale transactions.

 

What Is a Sponsor Sale?

            A sponsor sale refers to the purchase of a condominium unit directly from the developer known as the “sponsor.” These deals come with:

 

• Limited buyer protections
• Fewer contingencies
• Higher closing costs

 

        In most cases, the sponsor will not negotiate the contract terms, resulting in a “take it or leave it” scenario that strongly favors the seller.

 

The Punch List: Make It Part of the Contract

        In new construction purchases, especially when the unit is already built or near completion, buyers should conduct a detailed walkthrough before signing the contract. This walkthrough is used to identify defects, incomplete finishes, or deviations from the marketing materials.

 

        These issues must be documented in a formal punch list—a list of items the sponsor is legally obligated to repair or complete before or shortly after closing.

 

        To be enforceable, the punch list must be:

 

• Completed and signed at the same time as the contract
• Explicitly incorporated into the purchase agreement

 

Common punch list items include:

 

• Scratched or damaged floors, walls, or countertops
• Misaligned or non-functioning doors, cabinets, or appliances
• Paint defects or missing trim
• Incorrect finishes or missing fixtures

 

        A buyer’s attorney plays a critical role by ensuring:

 

• The punch list is attached to the contract as an exhibit or rider
• The sponsor’s repair obligations are clearly defined
• A firm completion timeline is included, ideally before closing, or held in escrow if post-closing

 

        Without these protections in writing, the sponsor may later claim that the unit was delivered as-is, leaving the buyer with no legal recourse after closing.

 

Closing Costs: Often Higher Than Resale Purchases

        Sponsors typically shift many of their own costs to the buyer. These inflated buyer closing costs may include:

 

• NYC & NYS transfer taxes
• Sponsor’s attorney fees
• Working capital contributions or reserve fund fees
• Document preparation and filing charges

 

Real Estate Taxes: Prepare for the Year-Two Shock

        First-year property taxes on new construction are often based on incomplete assessments during construction. Once the building is fully assessed, taxes can increase by 20–30% or more in the second year. Buyers should plan accordingly when estimating monthly carrying costs.

 

Restrictions on Resale or Rentals

        Many sponsor contracts contain restrictive resale or sublet clauses, including:

 

• Prohibiting resale within the first year
• Requiring sponsor approval before listing or renting
• Penalties for unauthorized transfers, including potential contract cancellation and deposit forfeiture

 

        These restrictions can significantly impact investors or buyers looking for flexibility.

 

View Obsolescence and Unsold Inventory Risk

        Two major risks that are often overlooked in glossy marketing brochures:

 

• View loss: Future nearby developments may block light, air, or skyline views—especially in booming neighborhoods.
• Sponsor-held inventory: If many units remain unsold, sponsors may rent them out or delay board turnover, impacting:
  • Common charges
  • Building culture
  • Long-term property value

 

Conclusion: Don’t Go It Alone

        Buying a new construction condo from a sponsor in NYC is not your typical real estate transaction. With elevated closing costs, tax uncertainties, limited buyer protections, and often non-negotiable contracts, it’s critical to work with professionals who understand the process.