In NYC co-op and condo practice, a red herring is the preliminary version of a building’s offering plan, the sponsor’s draft disclosure document, circulated to prospective buyers or to tenants in a conversion before the New York State Attorney General has accepted the plan for filing. The name comes from the red disclaimer printed on the cover, which warns that the document is a draft, still subject to revision, and not yet accepted by the state. Once the Attorney General’s Real Estate Finance Bureau is satisfied that the plan makes full and accurate disclosure under the Martin Act, it is accepted for filing and reissued as the black book, the final offering plan that governs actual sales.
Because the red herring is not final, its terms can still change, and prices in particular may rise before the accepted plan is issued, so a number printed at this stage is not one a buyer can rely on. In a rental-to-co-op or condo conversion, the red herring is also the trigger for tenants’ rights: it is the point at which a tenant association typically organizes, hires its own attorney and engineer to test the building’s condition against the sponsor’s claims, and prepares for the purchase decision to come. The sponsor cannot accept tenant purchase commitments until the black book is out, and the law discourages sponsors from warehousing vacant units to tilt a conversion. Reviewing the red herring closely, alongside the building’s financials and board minutes, is the window in which problems are cheapest to catch.
Facing a conversion or trying to make sense of a red herring before the numbers firm up? MD Squared works with offering plans and building financials every day and coordinates the attorneys and accountants who review them, so boards and owners understand what a draft plan actually commits them to. Our Condo-Coop Property Management service supports boards, owners, and residents through conversions and every stage that follows, and you can go deeper in our guide to condo offering plan requirements. Get in touch with our team and put experienced management behind your building.
