Would You Buy a Condo in A Building With Only 3 Units?
If so, you better keep reading. Hoboken has very few co-ops. Most units in Hoboken are condos. A condo building is run by the condo association. The condo association is made up of the unit owners. Each unit owner has a vote. Sometimes, that vote is proportional in relation to the size of the unit owned. Other times, it is 1 vote per unit. So what’s the problem with that, you ask?
Hoboken has many older 3 and 4 story homes that have been converted into 3 and 4 unit condos. Let’s say you’re about to purchase a unit in one of these 3 unit buildings. You would own 24% of the total square footage of the building, your upstairs neighbor owns 24% and the family downstairs in the duplex has 52% of the total. So your vote is worth 24%, the upstairs vote is worth 24% and guess who controls the building? Or the same owner owns two floors and now the third floor unit is for sale. Each condo unit gets one vote. Again, your soon to be neighbor makes all the decisions.
Why Should You Care?
Living in a condo building requires cooperation among unit owners. It also requires decisions to be made that effect everyone. Think about who decides how much the reserve fund should be, whether special assessments will be imposed or whether maintenance fees ought to be increased, and if pets are allowed. When one unit owner has a controlling interest, all these decisions can be made by that owner. What if you prefer to live in a well maintained, clean building but your neighbor could care less? If they decide how the condo fees are spent they may not be willing to repair the roof, paint the common areas, clean the hallways or install new lightings. Owning property requires maintenance and upkeep. Improving property costs money. If you’re not on the same page as the neighbor with the controlling vote, you have no recourse except to make improvements and repairs at your own expense. Or you may have a really difficult time selling when your building looks like a money pit.
Even Under The Best Circumstances, How Big Is Your Safety Net?
If you and your neighbors all get along famously and agree on exactly how your condo should be kept and financed there is one more thing to consider. When you purchase in a condo building with 10 or more units, not only is the governance of the condo association likely to be more of a democratic and participatory process but there are more unit owners chipping in to handle maintenance costs and repairs when needed. Many small Hoboken condo buildings have very meager reserve funds. Often, they are no more than a few thousand dollars. Smaller buildings are more commonly self managed. They tend not to have regular meetings, don’t keep minutes, and sometimes have no budget. Of course, these are all items your attorney should be checking into during attorney review. Unfortunately, it is often overlooked.
How to Protect Yourself
Are all small Hoboken condo buildings to be avoided? No – some of them are fine. They have attentive owners who run the association properly or pay a management company to do much of the work. There are condos in Hoboken with smart unit owners who have established adequate reserves and prepared a realistic budget. The voting rights in some small Hoboken condo buildings are allocated 1 vote per unit specifically so that no one unit owner controls everything. This is set out in the condo documents – the certificate of incorporation and the bylaws. The important lesson is that you ask the right questions before deciding to make an offer on a condo unit in a small building. Know what you’re getting into before you buy.