Public offering statement

Key Takeaways

• A public offering statement is the developer's disclosure package for a new unit, and the declarant must prepare it before offering any interest in a unit to the public (RCW 64.90.605).
• The purchaser may cancel the purchase contract within seven days after first receiving the public offering statement, and cancellation is without penalty with all payments refunded promptly (RCW 64.90.635).
• If the buyer received the statement more than seven days before signing the contract, there is no cancellation right under that section.
• A resale certificate is the different document a current unit owner delivers on a resale, and it carries a five business day cancellation window (RCW 64.90.640).

What It Means

A public offering statement is the disclosure package a developer has to put in a buyer's hands before selling a unit in a new Condominium or other common interest community. It is not a marketing brochure. It describes the community the buyer is joining: the declaration and governing documents, the budget and the assessments each unit owes, the association's finances, any warranties, any liens, and the rights the developer has kept for itself while it finishes building.

The reason it exists is timing. A buyer of an existing house can walk the property and hire an inspector. A buyer of a new unit is often buying from a plan, joining an association that does not have a track record yet, and signing a contract long before the building is done. The statement gives that buyer the documents, and the statute gives the buyer a short window to read them and walk away. Brokers on the buyer side treat delivery as a dated event to log, because the cancellation clock and the Earnest Money both hang on it. Our guide to building a contract review system covers the file discipline this takes.

How It Works in Washington

New Washington common interest communities run under the Washington Uniform Common Interest Ownership Act, chapter 64.90 RCW. RCW 64.90.605 requires a declarant, before offering any interest in a unit to the public, to prepare a public offering statement, and it requires any declarant or dealer who offers a unit to a purchaser to deliver that statement in the manner prescribed in RCW 64.90.635.

RCW 64.90.635 sets the clock. The purchaser may cancel the contract within seven days after first receiving the public offering statement. Deliver it more than seven days before the buyer signs and no cancellation right arises under that section. Deliver it fewer than seven days before closing and the purchaser may push the closing date out up to seven days after receipt. Cancellation is without penalty, and every payment the purchaser made before cancelling must be refunded promptly, so the Rescission right has real teeth. Notice can be hand-delivered to the declarant at the address in the statement or mailed prepaid, and the mailing date controls. Older condominiums created before July 1, 2018 fall under the Washington Condominium Act, chapter 64.34 RCW, where RCW 64.34.420 gives a matching seven-day right. Either way, the delivery date is a Material Fact the broker should document, as our piece on earnest money and contingencies explains.

Example

Cascade Ridge LLC is selling units in a new 60-unit building in Everett. Marcus Bell tours unit 314, and the on-site sales agent hands him the public offering statement on Tuesday afternoon. Marcus signs a purchase agreement for $489,000 that same afternoon and writes a $15,000 earnest money check.

Because Marcus received the statement seven days or less before signing, RCW 64.90.635 gives him seven days from Tuesday to cancel. On Thursday he reads the budget and finds the monthly assessment is $612 and the association has a garage-deck repair coming that the reserve study does not fully fund. On Friday, day four, he hand-delivers written notice of cancellation to Cascade Ridge at the address printed in the statement. The cancellation is without penalty and his $15,000 comes back promptly. Had Cascade Ridge given Marcus the statement two weeks before he signed, he would have had no cancellation right under that section and would be holding a $489,000 contract.

Common Mistakes and Exam Traps

• The seven-day clock runs from the buyer's receipt of the public offering statement, not from mutual acceptance of the purchase agreement.
• There is no cancellation right under RCW 64.90.635 when the buyer received the statement more than seven days before signing. Early delivery is how a developer closes the window, and it is legitimate.
• A public offering statement and a resale certificate are not interchangeable. The declarant or dealer delivers a public offering statement on a new unit with a seven-day window; the current unit owner delivers a resale certificate on a resale with a five business day window under RCW 64.90.640.
• Delivering the statement late does not void the contract by itself. It gives the buyer a right to cancel, and if it lands fewer than seven days before closing, a right to move the closing date.