On this page
- An offering memorandum holds a summary, the rent roll, the trailing twelve months of actual income and expenses, any pro forma, the property and location sections, and the comparable sales.
- Check every figure against your own records before it goes out, and see that any projection is labelled as one, with each assumption written out.
- Buyers sign a confidentiality agreement before they see it, and the signed agreements double as a record of which buyers the broker brought in.
- A licensee can be disciplined for a substantial misrepresentation, and California's deceit statute reaches anyone who states as fact what they have no reasonable ground to believe.
An offering memorandum for an apartment building is the package a buyer reads to decide whether to make an offer: a summary, the rent roll, a year of actual income and expenses, any projection marked as one, sections on the property and its location, and the sales that support the price. The broker writes it, but the numbers come from you, so check each one before it reaches a single buyer.
Buyers price the building from this document and then test it in due diligence. A figure that fails that test comes back to you as a price reduction, a credit, or a buyer who walks.
What goes into an offering memorandum
| Section | What it holds | What to check |
|---|---|---|
| Summary | The price or the offer process, the unit count and mix, the year built and the headline income figures | That every number matches the sections behind it |
| Rent roll | Each unit's current rent, deposit, move-in date and lease status | That it matches your ledger and your bank deposits, unit by unit |
| Trailing twelve months | Actual income and expenses for the last twelve months, month by month | That it ties to your books, with one-time items marked |
| Pro forma | What the building could earn under stated assumptions | That it is labelled as a projection and each assumption is written out |
| Property | Construction, systems, parking, permits, rent control status and any retrofit order | That it agrees with the City's records |
| Location | The neighborhood, transit and the rental market around the building | That it describes the block the building is on |
| Comparable sales | Sales of similar buildings and how the price compares | How each sale differs from yours, and whether a sale that cuts against the price was left out |
The pro forma is the section most likely to run ahead of the facts, because it describes a building that does not exist yet. In the City of Los Angeles, the Rent Stabilization Ordinance lets an owner reset a unit's rent when a tenant leaves voluntarily or is evicted for not paying, and while the tenant stays, the yearly increase is capped at LAHD's allowance, which is 3 percent for July 1, 2026 through June 30, 2027. A pro forma that shows every RSO unit at market rent next year is counting on turnover nobody can schedule. The property tax line moves as well, since a sale resets the assessed value under Proposition 13, and a buyer will run the expenses at the new figure whatever the memorandum shows.
Checking the memorandum before it goes out
Read the draft the way a buyer's lender would, with your own records open beside it.
- Tie the rent roll to the month's deposits. If a unit pays late, pays in part or pays through a subsidy, show that in the rent roll instead of leaving it for a buyer to find in the bank statements.
- Tie the trailing twelve months to the books your CPA works from. A repair paid from a personal account, or a stretch with a unit empty, belongs in a note.
- Check the unit count against LADBS's building records and the rent control status against LAHD's RSO property search. A memorandum that counts an unpermitted unit, or calls an RSO building exempt, makes a claim the City's own records contradict.
- Read the pro forma's assumptions one at a time. Each should be written out, and the heading should say the figures are projected.
- Look for what is missing. A roof you know leaks, an open code order or a tenant dispute that shapes the income belongs in the memorandum or in the disclosures that go with it.
These checks run against the packet you gathered before listing, so keep that packet current, month by month, until the building sells.
The confidentiality agreement comes first
Ask your broker to require a signed confidentiality agreement before any buyer receives the memorandum or the rent roll. Have it cover:
- who is signing, meaning the buying entity and a person with authority to bind it;
- use of the material only to evaluate the purchase, shared no further than the buyer's lenders, partners and advisers;
- no contact with tenants, the manager or vendors, and no entry into units, except through the broker;
- return or destruction of the material if the buyer does not go forward.
Keep every signed agreement, with its date. Together they record which buyers the broker brought to the building and when, and that record is what a protection period gets argued over if the listing ends without a sale. Ask for a copy of the log as it grows.
What goes in the data room, and when
A data room is the online folder where the broker posts the documents behind the memorandum. Release them in stages, so each buyer sees more as it commits more.
- At launch: the memorandum itself, to buyers who have signed the confidentiality agreement.
- For buyers preparing an offer: the full rent roll without tenant names, the trailing twelve months by month, the tax bill, the utility bills you pay and a list of capital work with dates.
- Once you accept an offer: the leases, service contracts, permits, any reports you hold, the insurance loss history and whatever the contract's due diligence list calls for.
- During escrow: tenant estoppel certificates where the leases or the buyer's lender call for them, and updated rent rolls as each month's rent comes in.
Leave tenant names, phone numbers and payment details out of anything posted before a buyer is in contract. Unit numbers, rents, deposits, move-in dates and lease terms are what a buyer needs to price the building. Date every version, too. When a rent changes or a unit turns over after launch, post a new rent roll with a new date and keep the old one, so there is a record of which numbers each buyer saw.
Accuracy, and who answers for an error
The memorandum is your broker's marketing, and the law holds the broker to it. Under Business and Professions Code section 10176, the Real Estate Commissioner can suspend or revoke a license for making any substantial misrepresentation, for false promises likely to influence or induce, and for any other conduct that amounts to fraud or dishonest dealing.
The rent roll and the income figures come from you, and California's deceit statute is written about whoever makes a statement. Civil Code section 1710 counts as deceit the assertion as fact of something untrue by a person with no reasonable ground to believe it, and the suppression of a fact by someone bound to disclose it, or who gives other facts likely to mislead without it. Section 1709 makes a person who willfully deceives another, to get them to change position, liable for the damage that follows.
Unit count changes the paperwork, and it leaves those rules alone. A sale of one to four units carries the statutory disclosures in the article that begins at Civil Code section 1102, and a waiver of them is void. A building of five or more units falls outside that article, though other rules still reach it, such as the Residential Property Report a City of Los Angeles seller must deliver, and the deceit statute has no unit count at all.
Shaya is a real estate agent rather than a lawyer, so take the question of how those rules apply to a statement in your broker's memorandum, and what any disclaimer in it changes, to your attorney. What he can do is go through the draft with you, line by line, against your own records before a buyer sees it.