Business owners are always looking to increase profits and space. As most savvy business owners know, the option of buying rather than renting is a better investment because it will save them money down the road. However, finding affordable property can be problematic at times.
These two issues have spawned the popularity of commercial condominiums, which are similar to residential condominiums except that people own units of a building reserved for commercial ventures. Commercial condominiums offer generally what business owners desire: space, substantial savings and control over their property and monthly expenditures and maintenance fees. The ability to control the building operations and expenses is also an attractive value to a business owner. No longer does the business owner have to worry about increased rent and maintenance fees from a landlord.
The owners of the commercial condominium association can set their own budget and monthly maintenance fees and manage their own amenities as they see fit. This is especially attractive to small business owners who do not have the funds to purchase an entire building. Moreover, the owners of commercial condominium units enjoy tax advantages over commercial tenants who are generally unable to claim deductions for property taxes, repairs and depreciation. Owners of the condominium may also negotiate a change in the allotted space to each unit owner if the units and/or master deed are flexible in nature. Although owning over renting has its disadvantages such as a down real estate market, and repair/upgrade expenses, the benefits generally outweigh the detriments.
Legally, commercial or business condominiums are generally governed under the same rules as residential condominiums. The New Jersey Condominium Act applies to all condominium units in New Jersey, including those created for commercial or mixed purposes. However, disclosure laws, such as the Planned Real Estate Development Full Disclosure Act, are not applicable to commercial condominiums. There are also many practical differences that are specific to commercial condominiums.
As such, it is imperative that the commercial condo’s counsel, Board and managing agent be familiar with the particular differences between residential and commercial condominiums to be able to provide appropriate representation and/or operation the Association.