1 owner has majority of commercial condo units, do I run?

Question

Hi all -

I have an opportunity to purchase one unit of an eight unit commercial condominium. I think it's a great deal.

The bad news is that one person owns 5 of the 8 units, giving him majority votes. The building looks to be in good shape, but a dozen Belgian blocks have separated from the sidewalk, parking lot needs to be striped, there is zero landscaping, etc. All this makes me think that things don't get fixed because the owner has to foot 62.5% of every assessment.

Is this worth pursuing by speaking to the majority owner, commercial attorney, or should I just run the other way?

Thanks for helping a newbie purchase his first commercial property.

- Michael

Bob Mason · Answer

it may be worth having a conversation with the majority owner. Maybe he didn't see the unit for sale. Maybe he's looking to sell his 5, giving you 6 of the 8 units. Whichever way it goes, there's a low risk to you.

Brian Ploszay · Answer

Wonder why this owner wouldn't want to buy that unit?

I think you should take a pass on this.

Michael Fuoco · Answer

So after many back-and-forth emails with my realtor, I received the following from the majority owner of the condos:

We are on an accrual basis for accounting and do not carry long term reserves. We collect the small amount of fees each month and pay the common expenses and then carry forward the balance for the winter months and any ordinary repairs.

We did not have regular meetings as the association only handled the regular expenses and with only three of us on very busy and different schedules any issues were handled over the phone or via email. Things are very simple, and likely will be underwhelming for your buyer given his participation in a larger association.

There is not a formal history of repairs, as our repairs have generally been small issues (parking lot light replaced, etc). We finally replaced the courtyard sign last year, and a few years ago replaced the stones in the courtyard and in front of the building. All of these were paid for out of the accumulated monthly fee with no assessment.

We file a registration with the state each year and we file a tax return each year. I can forward the tax return if he feels that would be helpful.

I will be happy to speak with him on Friday, but I have meetings most of the day so it won’t be until late in the day.

Part of me says, "how bad can it be", while the other half says, get away, far, far away.

Joel Owens · Answer

I do not like investments where I do not maintain control. I typically pass on those. Too many other investing opportunities where that condition does not exist.

Michael Fuoco · Answer

Here is the section from the by-laws regarding votes:

It doesn't say anything about majority. I think I should then get a copy of the master deed. Thank you for your help thus far everyone!

Jessica Zolotorofe · Answer

The majority may not always call the shots. Have an attorney take a look at the bylaws and master deed. Good chance he has no choice but to make certain repairs. Also, if there are a number of board members that can be elected, he can't fill all of the seats, so you would be on the board and privy to and able to make certain decisions that he would be bound to follow. As far as him not buying the final unit, there could be plenty of reasons. That wouldn't in itself scare me away.

Ronald Rohde · Answer

Check the condo docs, there are often prohibitions or restrictions on majority less than all ownership. His power may not be as much as you think. Do you want to improve all those things?

Matthew Paul · Answer

The majority will call all the shots , you will have no say or control .

Michael Fuoco · Answer

I'd have to assume he knows the unit is for sale. The unit is set up as a dentist's office, so he might not be interested in owning it and leasing it, since he is a dermatologist.

1 owner has majority of commercial condo units, do I run?

1 owner has majority of commercial condo units, do I run?

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