A punch list is a complete itemization of property defects that a developer provides prior to closing that aggregates all the items which still need to be fixed within the property. The punch list is provided prior to closing and may include items that will be addressed both prior to closing and post closing. Its purpose is to hold the developer accountable to provide a property that is in line with the agreed upon quality and finishes that were promised upon during the sales process.
How does a punch list get created?
Prior to closing, the buyer of the property will conduct a walk through of the property with a representative for the developer. During that walk through the buyer will note all the defects which are visually apparent, and the sponsor representative will note them. It's important to recognize that if these items do not get written down and agreed upon, then it will be nearly impossible to hold the developer accountable to deliver on the verbally agreed upon expectation.
After the punch list is created and agreed upon, the developer should email the punch list to the seller and all respective real estate lawyers on the transaction. Additionally, it is of great benefit to get the sponsor to agree to a specific date by which all punch list items will be completed. Getting this in writing is also essential although it may be much harder to receive.
What happens when there is a disagreement about items on the punch list?
When a disagreement takes place, it's essential that a buyer starts by getting their broker involved right away to see if they can mend the differences in opinion. This happens all the time, particularly in new development, where buyers may be buying based on model units and floor plans and developers are trying to finish the projects as quickly as possible. Sometimes buyer expectations are unreasonable, but it's important to note that sometimes developers try to get away with not fulfilling their obligations. If the real estate agents can't help mend the difference in opinion, it's essential that lawyers are immediately notified.
In some instances, material defects that have not been addressed prior to closing may put a property sale on ice. The buyer may rightfully state that they refuse to close before the item is addressed. In other instances, the item may be aesthetic in nature and can easily be addressed post closing without negative impact on the quality of life within the property.
How do punch list items get worked on?
Things that are put on the punch list will be worked on in the days prior to closing and in some instances post closing. Once a closing takes place, it's important to remain flexible to allow workers access to the newly purchased property so that they may complete their work. In New York City, some of the work requires specialists, and they may have to do the same work in every unit of the new condo development, so that requires the new owner to be open to making their apartment available whenever the specialist is in the building.
As punch list items are resolved, the developer representative will ask the buyer to confirm the competition of these respective items. This officially removes any further obligation, unless the work that is conducted is of poor quality.
What types of items are appropriate for a punch list?
Realistically anything you could imagine is worthy of a punch list. Written agreement is key to making any punch list items enforceable. Here is a list of potential punch list items:
Apartment needs to be repainted because of scuffs and dirt
Countertops need to be replaced because of cracked marble
Water fixtures need to be replaced because they are rusted
Appliances need to be serviced, as not all of them were working properly
New hardware needs to be installed into cabinetry, as current installation has poor craftsmanship and is crooked in many instances
Toilet won't flush properly. Needs servicing.
Several planks of wooden floor are dented and scratched. Need replacement.
This list can go on indefinitely, but this should provide for some valuable examples.