If you have listened to the radio in Central to North Jersey these past few weeks, you may have heard several advertisements for the sale of newly constructed “condo-hotels” in Florida.   

 

Condo-hotels are not a new concept, and have been around since the 1970s, mostly on the shores of Hawaii or the ski slopes of Colorado.  However, in the past five years, condo-hotels have undergone a rebirth, emerging as hotspots in the resort market, mostly in Florida, Colorado and Hawaii, but also in large metropolitan areas such Miami, Chicago and Las Vegas.

 

So how is a condo-hotel different from a regular condominium?  Generally, while each condominium unit in a condo-hotel is owned individually, these units are rented out by the hotel developer/operator like a normal hotel, and the owners share facilities and common elements with other unit owners, as well as hotel guests.  Moreover, in addition to such facilities and services provided in normal common interest communities, condo-hotel owners and guests may also share spa and gym services, front desk services and food services.  One question that arises is who has control over these common elements, facilities and services – the unit owners or the developer/operator?  The answer depends on the condominium’s governing documents and separate property/maintenance agreements.  Owners in condo-hotels often agree to give up certain rights to make decisions, including the right to decorate and maintain their individual units, in order to comply with uniform standards, especially those participating in the hotel’s rental program.

 

For some, these condo-hotels are second homes or vacation getaways.  For others, they are seen as investments with the lure of returns from rentals and appreciation.  The sales pitch is simple – own a little piece of paradise without the hassle of finding renters or fixing construction defects or broken appliances.  However, there are potential pitfalls for the unaware purchasers of these units.  Occupancy is seen as the most troubling factor; namely, how good is your investment if the occupancy rate is at or below 50%?  One condo-hotel in Las Vegas opened in June 2006 to little-to-no fanfare and, unfortunately, has been unable to live up to owners’ expectations for rental revenue, with units remaining vacant for significant periods of time.  Additionally, the new construction and emergence of a substantial number of condo-hotel units has created a potential glut of available units on the market.  Another factor to be wary of is the additional condo fees that may go along with ownership of a condo-hotel unit.  Aside from general monthly maintenance fees, unit owners may also be saddled with maid service/cleaning fees, rental/management fees and furniture replacement funds.  Only time will tell, but for now, that little piece of paradise may come with a higher than expected price tag.

        

If you would like to discuss the contents of this blog and how it affects condominium associations in more detail, please contact one of the attorneys in Stark & Stark’s Community Associations Group.