Care to Condo?

By Attorney Robert D. Stewart

Despite the perception that the housing market has been flattening in recent months, the statistics suggest that any sag in the overall market has not yet reached the condominium market in Greater Boston. The number of condos sold, the percentage of condos compared to total home sales, and the average price of condominium units all rose in 2005.

From the economic side of the coin, the popularity of condominiums in the city makes perfect sense. Over the past few years, the rental market has indeed flattened, reducing the income that an owner of a multi-family property can generate each month. An owner of a multi family can convert the property into separate condominium units without great cost or delay, and sell the units for far greater than what the multi-family is worth as is. The process of converting a building into a condominium is fairly uniform, as their creation is governed by statute in Massachusetts (Massachusetts General Laws Chapter 183A), so the roadmap to create the governing documents is fairly straightforward. The creator of the condominium usually retains total control over the construction, pricing, and governance of the project until every unit is sold. At that stage, they ride off into the sunset with a typically healthy profit.

From the buyer’s perspective, many advantages make purchasing a condominium equally attractive. With all of the undergraduate and graduate students living throughout the city, condos have become an attractive alternative to paying four or more years of rent. Many parents of college students are opting to invest in a condominium for their children to live in during college, banking that the investment will appreciate and bring a profit at graduation. Most parents who made that bet in the past ten years are now playing with house money, and the trend seems to continue. Second, many graduates are opting to stay in the city, and condos represent a great option for first time buyers. Buying a condo in the city, they can be close to work and cultural activities, and may be able to live without a car (or for couples, two cars).

Prospective buyers should look out for a few common pitfalls. If the condominium unit they are interested in purchasing has been “newly converted” and is being sold as a condominium unit for the first time, it is critical that the so-called “condominium documents” get a thorough review. These documents dictate how the common affairs of the condominium are managed, including issues such as maintenance, landscaping, major and minor repairs, alteration of the individual units, storage, parking, tenants, and many other critical issues. If the rights and obligations of the unit owners aren’t clearly and properly stated, it can lead to issues between the owners and potential problems with a future resale. Further, the condominium documents can create restrictions on use, the ability to rent, rights of first refusal of resale, etc.

With smaller condominiums (with five or fewer units), the management duties are typically shared between the unit owners, as opposed to using an outside management company. To some potential buyers this is a benefit, as they wish to have control over what happens; to others it is a burden, as they do not wish to have this added responsibility. In either case, a careful review of the condominium documents early in the negotiation process is important.

A carefully drafted Offer to Purchase and Purchase and Sale Agreement will allow a prospective buyer to act fast in terms of making an attractive offer on a property they like, while preserving their rights to review the condominium documents to their satisfaction.

Contact a Massachusetts Real Estate Attorney

For more information or advice on buying a condo in Boston or another Massachusetts town, please contact the Parker Scheer real estate attorney Rob D. Stewart. If you prefer, you can also telephone our offices in Boston seven days a week at toll free 866-414-0400.

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