Considering a property in Hartford, CT area

[Sam Shah]

Hi Everyone,

We are considering purchasing a 12 unit property in Hartord, CT area. We don't live in the area. We live upstate NY. We have a good agent who has sent this deal our way. I'm just doing some due diligence in terms of what the community here thinks of the area. The property is located on Capitol Ave. Buildings have been as a condo status since before the current owner purchased it.

I'm not familiar with how this works when apartment units have been set up as condo status and the pros and cons associated with that. Looking for help from the fellow investors in the area here.

Any comments you can provide regarding the area or about the apartments set up as condo status or anything else I should know about, would be appreciated!

Thanks in advance!

Sam 

[Filipe Pereira]

Originally posted by @Michael Noto:

@Sam Shah First, I would check how the city has it listed. Does the property card have it listed as a 12-unit apartment building? Making sure the zoning is correct is step one because it is very hard to change the zoning for a property in the Hartford area. 

Sam, 

Mike is totally right here. This was actually an issue with a property that came up in the south end. It was advertised as a 6 plex, but when we researched it further, it was zoned as a 4 plex. Due to this, we backed away. Later on however, the sellers produced documents that the property was grandfathered in as a 6 plex, but the property card had just not been updated. 

In this case, it's technically two separate properties, with two separate deeds rather than 1 big property. It isn't uncommon for there to be 6 unit buildings on Capitol Ave in Hartford (there are tons of them). This isn't to say that because of this they are all "legal & conforming" however, this pair of buildings (sold as a bundle) are.

In regards to the condo part of this, I didn't know much about it until the last day or two after doing some deep diving into the statutes. I figure I might as well share this publicly, as it will likely be of value to someone else down the road. The following information is lightly paraphrased / copied from the report: "ASSESSING CONDOMINIUMS FOR PROPERTY TAXES" written by John Rappa, hosted on the CT General Assembly's website.

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In Connecticut, towns must assess all properties based on their fair market value. This covers many factors, including the level and quality of municipal services. A condominium that does not receive a municipal service might sell for less than a comparable one that does, all other things being equal. Due to the discrepancies in services received by the condominium, the owners can appeal to the town's board of assessment appeals in order to decrease their assessment (and thus their tax liability). 

At the time of the writing, there was no documentation that assessors were required to assess condominiums differently if they do not receive a municipal service.

State and federal courts have rejected claims that Connecticut towns must reduce the assessment for properties that do not receive all municipal services. While towns cannot assess condominiums differently than other properties, a few compensate them for comparable services procured from private vendors.

The statutes require towns to determine a property's FMV and tax it at 70% of that value. It does not allow towns to assess and tax condominiums differently, regardless of number and type of municipal services they receive.

(The only exception to the fair market standard applies to properties participating in the state's land conservation program. Towns must determine their value based on their current use without regard to the price they could command if they were offer for sale on the open market. They must tax these properties at 70% of that value.)

Connecticut law does not require towns to provide condominiums the same municipal services provided to other residential properties. Nor does it require towns to reimburse condominiums for the cost of procuring those services from private vendors. But 11 towns compensated condominiums for trash pick up or hydrant maintenance, according to a 1991 survey done by the Connecticut Chapter of the Communities Associations Institute.

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Pros: 
People preach lower taxes on buildings with condo status. 

Cons: (that I have found):

I think one of the biggest "snafus" to look out for, is that if the condo was converted in the "expedited conversion program" the current (or previous) owners had to offer lifetime leases to tenants living in the building. So if you are expecting to just waltz in and jack up the rents, you might be met with a few surprises. Life leases give renters more control, and really ties the hands of the owners in terms of evictions. 

Insuring a condo HOA should be looked into as well, as there can be higher premiums.

I'm not an attorney, but I've since reached out to @Edward Schenkle, who is, and hopefully he can chime in here as well in regards to the legal stuff.