“When a condo building is 75 percent sold,” said Brian M. Stolar, a developer, “that triggers new opportunity and advantage for those buyers coming in after the threshold is reached.”Mr. Stolar, the chief executive of the Pinnacle Companies in Chatham, explained, “The building is legally under homeowner control after that point, and any new buyers are essentially shielded from the possibility of a developer deciding to take the building rental.”Developers often decide to switch from condo to rental, or vice versa, depending on which way the market is turning. Mr. Stolar said that he was aware of several condo developers who were contemplating the switch at buildings where sales are going slowly — or are even stalled — right now. [snip]Under New Jersey law, when sales on 75 percent of units at a particular building have closed, management control shifts to a homeowners’ association.Jeffrey Herrmann, a partner in the law firm of Cohn Lifland Pearlman Herrmann & Knopf of Saddle Brook, describes the process that ensues:Within 60 days of hitting the sales mark, an election is held among residents, to choose a board of directors and a president of the association. Then, a “transition study” is undertaken, in which the board hires an accountant to verify that the building owner has made all scheduled payments into the reserve fund for operating costs, and an engineer to certify that the construction is complete and sound.This alone is a boon to subsequent buyers, Mr. Herrmann said. Before the transition study, all a buyer can do in the way of assessing overall quality is hire a home inspector to check out an individual apartment.“If you buy in before the results of a transition study are known,” Mr. Herrmann said, “you might find a situation where millions of dollars are required to remediate the problem, and in this economic environment, there may not be a source of money out there to get it done.” (He added that he once handled a case in North Bergen in which, during the transition study, a building was found to be sinking into the Hudson River.)Dean Geibel, whose company Metro Homes is the builder of the new 440-unit Trump Plaza Jersey City, acknowledged that “confidence builds for buyers when a building is over the 75 percent hump, stabilized and successful.”Developers do have the right to rent out any unsold units even after a homeowners’ association is in control, he noted — but the rented apartments must be maintained and operated under conditions set by the association.At the new Trump building, according to Mr. Geibel, there are signed sales contracts for 85 percent of the units, and closings have taken place for 50 percent.At Gull’s Cove condos, another Metro Homes project in Jersey City, 75 percent of sales will be closed within the next month or two, he said; at Metro Stop, a nearly complete building in Hoboken, about 50 percent of the units are under contract.The 315-unit first phase of the Beacon condominium project in Jersey City has 75 percent of its units under contract, according to the developer, George Filopoulos of MetroVest. But it has gone through a similar process before.In 2005, the Beacon sold rapidly when work began on transforming its buildings, the Art Deco structures of a Jersey City medical complex, into condos. But as sales were set to close last summer, the home financing picture had drastically changed. The developer wound up putting 50 units back on the market, Mr. Filopoulos said, and at one point made them available as rentals.With the recent shoring up of the mortgage companies Fannie Mae and Freddie Mac, he said, sales have picked up again: Seven condos have sold in the last eight weeks.
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Topic: NYT: When Condos Become Rentals (Read 978 times)
