BY James M. Schrader
March 1, 2019
Everybody’s Business is Nobody’s Business
As a healthcare professional, a high probability exists that you now own, have owned, or will own a condominium. Most certainly you will be pitched the opportunity to buy one. Your condominium ownership might involve medical office space for your practice, a vacation unit elsewhere, or possibly student housing for a child attending college. While your experience as a condominium owner may provide years of enjoyment, yielding an attractive long-term investment in an appreciating asset, we commercial real estate professionals have seen first-hand the awkwardness, risks, litigation, and loss in property value that can occur when “Everybody’s Business is Nobody’s Business.” So instead of caveat emptor, we recommend, “Let the buyer be knowledgeable and informed.”
Who is in Control?
Answer: Not you. When you purchase a condominium, you become a minority owner willingly ceding control to the association, and its bylaws, in which you have a fractional voting interest. In a well-run condominium association of like-minded owners who get along, everything runs smoothly. However, unlike your personal residence where you pay the bills and call the shots on landscaping, maintenance and repairs, paint colors, and the selection of contractors and how to pay for them, you are one of many involved in the decision process. Trickier still are properties with only a few units, such as a medical office buildings, where one owner or alliance of owners ends up in a majority position and your role is relegated to writing checks with no say over the process.
In our experience, lack of control and the element of minority ownership, in many but not all cases, adversely impacts the marketability and value of an office building. We advise that prospective buyers of a condominium unit interview and interact with as many owners as possible before investing. You should attempt to determine if the association is well-run and functioning properly, as well as whether the fit is right, just as you would in assessing whether you wanted to practice medicine in partnership with others.
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