February 12, 2025 • 45 mins
Living in mixed-use communities and condo hotels offers certain conveniences but can also pose unique challenges that require careful consideration. In this episode of Take It To The Board, host Donna DiMaggio Berger teams up with Becker attorney Allison Hertz to explore the dynamics of the mixed use lifestyle, legal implications, financial responsibilities, and the day-to-day realities of living in these types of communities.
The growing popularity of condo hotels and mixed-use housing is reshaping the real estate landscape. Whether viewing these developments as investment opportunities or lifestyle choices, understanding their unique characteristics is crucial. Donna and Allison discuss the significance of branding, the dynamic nature of commercial amenities, and the value of these properties in today's real estate market.
Managing these properties isn’t without its hurdles. The duo delves into the legal frameworks—like ADA compliance—along with tax implications, liability concerns, and the nuances of insurance, maintenance, and financial assessments. They highlight potential pitfalls that can catch even seasoned buyers by surprise. Whether you're considering investing or making one of these properties your home, Donna and Allison’s conversation underscores the importance of understanding the complexities behind these highly amenitized communities before taking the plunge.
Conversation Highlights Include:
- Differences between mixed-use community and a traditional condominium or HOA
- How shared expenses typically get allocated between residential and commercial components, and common disputes that typically arise
- What potential buyers or investors should know about assessments and financial obligations in mixed-use properties
- How reserves work in these communities, especially when commercial and residential interests have different priorities
- Unique insurance challenges for mixed-use communities and condo hotels
- How shared infrastructure (parking, elevators, utilities) can complicate governance and budgeting in these communities
- Additional laws that impact people who own units in condo hotels
BONUS: Find out who is really making the decisions in these types of communities!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Hi everyone, I'm attorney Donna DiMaggio-Berger
and this is Take it to the Boardwhere we speak condo and HOA.
Today, we're going to betalking about two types of
housing options which requireserious deliberation on the part
of potential purchasersmixed-use communities and condo
hotels.
Living in a mixed-usecondominium, where residential
(00:22):
units share space withcommercial businesses like
retail shops, restaurants oroffices, offers both benefits
and challenges.
Choosing to live in a mixed-usecommunity requires careful
consideration of noise,commercial activity and
governance structure.
Before buying, prospectiveresidents should review the
condominium documents,understand any restrictions and
(00:43):
assess how the commercialcomponents will impact daily
life.
Now, condo hotels can be agreat option for buyers seeking
a vacation property with rentalpotential, but they also require
careful consideration of costs,restrictions and long-term
investment value.
Anyone considering a condohotel in Florida should review
the management agreement, therental program terms and
(01:04):
financial obligations beforecommitting.
Some common questions about bothof these housing options
include how do boards balancethe competing interest of
homeowners and business owners?
Are condo hotels a goodinvestment, and who really
controls the decision making inthese unique properties?
To help us answer thesequestions, I'm joined today by
my colleague, allison Hertz, aseasoned community association
(01:26):
attorney who has served invarious key roles with the
Florida Bar, including as theco-chair of the Condominium and
Plan Development Law Committeeof the Real Property Probate and
Trust Section of the FloridaBar.
That's a real mouthful Allison.
Allison, welcome to Take it tothe Board.
Speaker 2 (01:42):
Thank you, good to be here.
Speaker 1 (01:44):
So let's start with the basics, because not
everybody may be familiar withthese housing options and they
may not even have taken hold,you know, everywhere in the US.
So what defines a mixed-usecommunity and how does it differ
from a traditional condo or HOA?
Speaker 2 (02:00):
There are so many places that we go today that are
mixed use that people probablydon't even realize it's the old
don't judge a book by its covertype thing that you know
downtown buildings, hotels,highly amenitized community
shopping centers, residentialcomponents generally under the
(02:23):
umbrella of certain restrictivecovenants governing the whole
project.
In Florida we have thetraditional mixed-use
condominium and that's sort ofbecoming more rare where a
condominium association governsthe project.
Now it's more typical to havethose separated, where there may
(02:43):
be a condominium within abuilding and the typical common
elements or shared space isoperated by a separate business
owner and there's this sharedfacility concept that we have
now here in Florida.
Speaker 1 (03:00):
Florida.
I want to talk about both, butlet's start with the traditional
mixed-use condo where you'vegot a volunteer condominium
board of directors and they'reoverseeing a residential.
Let's say it's a seven-storybuilding, there's 80 units and
then on the ground floor there'sseven commercial units.
Now I have driven by those typeof communities and thought, wow
(03:22):
, that would be so convenient tohave a Whole Foods in my
building.
I could just pop down, have aspa service next door, you can
get your nails done.
It seems like it's such a greatlifestyle.
However, you and I know ascommunity association attorneys
that appearances can bedeceiving and that there's a lot
of things going on behind thescenes, a lot of tensions at
(03:44):
times between the commercialusage and the residential.
So for those traditional, whereyou've got that volunteer board
, how do they?
Speaker 2 (03:53):
navigate that Well.
I think many coexist in harmonyand the board does a good job
of managing both sides andmaking sure the interests are
protected and preserved bothsides and making sure the
interests are protected andpreserved.
There's always like thatnatural tension between the
sides and the traditional setuphere.
Boards need to understand andhave like a shared vision
(04:15):
between both sides of theproject here, because the
success of one side of theproject commercial is definitely
going to, you know, rely on thesuccess of the residential and
vice versa here.
So boards need to be realisticthat the commercial owner needs
to make money.
These commercial businessesneed to make money and a profit
(04:37):
in order to be successful.
However, the commercial ownersshould not be able to do that to
the detriment of theresidential portion of the
project.
So I'm not saying it's easy,but there is a way to do this
and there is a way to fairlybalance both sides of the
project so they can coexist.
(04:59):
We do see that.
You know there are problems aswell.
Speaker 1 (05:02):
In the mixed-use condos I've represented.
I don't think I've had anycommercial unit owners on the
board, which is unusual to mebecause they do have a very
vested interest in how theassociation is run.
Have you had commercial unitowners on the boards in your
mixed-use condos?
Speaker 2 (05:22):
I have, but I do.
I agree that it's rare thatthey're so focused on running
their business and most of thetime the residential owners do a
good job with the managementand administration that they
don't really feel like they needto get that highly involved
when the commercial units arenot so great in number.
Speaker 1 (05:42):
We have a statute in Florida, 718-404.
It's very brief, statutoryprovision, not lengthy, but it
does talk about a few things.
Can you tell us about that?
Speaker 2 (05:53):
Their statute exists regarding mixed-use condominiums
, and the bulk of it was fromthe mid-90s, where the statute
now protects residential ownersin a way, by stating that the
commercial owner cannot vetoamendments to the condominium
documents and they cannotcontrol the board if there are
(06:16):
more residential units thancommercial units.
So it was put in place toprotect owners from the
monopolization of the board bycommercial owners, which in a
traditional mixed-use project wereally don't see that much
anyway.
Speaker 1 (06:32):
That statute was intended to have retroactive
application correct.
Speaker 2 (06:36):
It was intended to have retroactive application but
we know that the court deemedit not to apply.
It materially altered votingrights and vested rights so it
was not deemed to be retroactive, although it attempted to be
retroactive, which we see a lotin the Florida law.
Speaker 1 (06:56):
So I'm sure you've heard this complaint before in a
mixed-use condo, which is, look, it just seems unfair that.
You know, as a residentialowner, I have leasing
restrictions.
I have to get my tenantsapproved right.
I have to do certain things,like you know provide a security
(07:17):
, a common area security deposit.
It's, you know, a 30-dayapproval process, sometimes even
lengthier, and my commercialunit owner next door or down
below doesn't have to do thesethings.
The same thing with alterations.
So in a lot of these and Ithink it's in older documents
but there's an exemption for thecommercial owners when it comes
(07:40):
to exterior alterations,signage, even landscaping.
I did have one client that hada very lengthy battle regarding
landscaping that the commercialowner put in place that did not
at all blend in with the rest ofthe community's landscaping.
Do the Florida statutes provideany cover in that case?
Speaker 2 (07:59):
Not necessarily.
I would say that's a documentissue right, what the
condominium documents haveconcerning all of these
restrictions.
And realistically, you need tobe able to entice tenants as a
commercial owner a lot of thetime and they need to be able to
operate and make residentialowners.
(08:23):
I mean, I do hear fromcolleagues that represent these
type of parties that they needcertain flexibility in place to
maximize their occupancy in thecondominium.
So they do, I suppose, get acertain level of special
treatment built into thedocuments and kind of is one of
those.
(08:43):
It is what it is type things.
Yes, there can be constraintsto what they do, but oftentimes
they do get this specialtreatment and frankly, I think
the residential owners buy inthese types of projects because
of the commercial amenities thatmight be available there.
(09:05):
So they, you know, while theycould change over time, they do
like these amenities and they'rethere because they want access
to these commercial amenitiesand different stores,
restaurants, you know youmentioned salons and med spas
and all kinds of things.
Speaker 1 (09:22):
Yeah, I think you're right, but I think a lot of
people may not dig deeper.
So, you know, we've had acouple of recent guests, we had
the former ombudsman, we had ananonymous owner in a luxury
building and a lot of times wefind that potential purchasers
they're really focusing on a fewthings.
They're focusing on thelifestyle experience.
(09:43):
Wow, wouldn't it be great tojust I'm cooking, I ran out of
something.
Oh, there's a Whole Foods downat the bottom of this building.
Just go pop in.
Or you know, whatever I nail wesaid hair, whatever it is
workout, Pilates but are theydigging deeper in terms of the
restrictions on those commercialunits, noise, the length of
hours of operation for some ofthose businesses?
(10:05):
Yeah, restaurants, great, butlet's talk about that.
How many potential purchasers,Allison, do you think, who live
in that mixed use building andthey may love the restaurant
below, but have they consideredwhat potential noise issues may
arise?
Speaker 2 (10:23):
And parking right.
That's a huge one.
Parking issues come up all thetime.
All of those issues areimportant to go in with your
eyes wide open as to what thisreally is.
Is there valet requirements?
What am I paying in terms ofparking?
How many vehicles can I haveAccess issues?
Do I get to enter the buildingthrough the point of entry that
(10:44):
I think I get to enter through,or is that only for hotel guests
?
So noises, smells, you knowwhat, if there's a nightclub at
the top floor of the buildingand there's, you know, after
hours, noise, see, when youvisit the building at 12 noon
(11:08):
are perhaps not the same as whenyou go at 10 pm, when it starts
the hustle and bustle of, like,the nightlife, particularly in
our urban city areas.
Speaker 1 (11:13):
The change also you know, the seven commercial
businesses you see operatingwhen you purchase may not be the
same seven businesses.
A decade from now.
There could potentially be a7-Eleven open 24 hours selling
lottery tickets and beer, andyou never intended that for your
building.
Is there any way to protectyourself from those kinds of
(11:34):
changes?
Speaker 2 (11:35):
I mean you would hope that the type of use would be
set forth in the controllingdocuments as to what type of use
the commercial units can be.
You know what can be there,right?
Is it going to be a subway?
I don't want to smellsandwiches being made all day
when I enter into the building,and some of them do address
(11:56):
these use restrictions.
Some of the older ones reallydon't.
So I think that's somethingimportant to look at, and
obviously they change over time.
I mean, the developers do areally good job of writing these
documents and trying to predictthe future in terms of how
things could change at theproject, but you just can't
(12:17):
anticipate every single thingthat may happen.
You know, 20 years later.
Speaker 1 (12:22):
So in some of our golf course communities I live
on a golf course community andthis has been driven home it's a
symbiotic relationship.
So if you've got a healthycountry club, let's say it's a
private club.
The club facilities are notcommon areas for the homeowners
association.
But you want a vibrant clubbecause again, symbiotic
(12:44):
relationship.
You want a vibrant club because, again, symbiotic relationship.
Is it similar in mixed use?
I mean, if you came to thebuilding and you had six of the
seven commercial units vacant,empty, what kind of impact does
that have on the building?
Speaker 2 (12:55):
Yeah, no one wants to see empty space.
It's just a bad look, right?
It just appears that somethingis wrong when it may not be.
It might be in a transition,but it also may cause the
commercial owner to struggle interms of paying for their
obligations.
That is not something that theother owners want to see and
(13:16):
they don't want to have to pickup the cost.
It also, you know the change inoccupancy.
This continuous change is nothelpful.
The units have to be built out.
There's construction, there'snoise.
It's a nuisance to the adjacentowners.
So having some level ofoccupancy is good.
The 7-Eleven or the subway, youknow, might not be what you
(13:38):
want to see.
I'm not sure.
I think I might rather have avacant space.
It just depends.
You know, being a lawyer, itdepends, right, it's a bad look.
Speaker 1 (13:47):
So I've sort of been referencing the commercial
spaces as being at the streetlevel, which is typical for some
of the traditional mixed-usecondos, but that's not always
the case, right?
So sometimes the offices are onhigher floors in a multifamily
building.
I got to imagine there's awhole different set of
challenges with that when you'vegot the general public
(14:09):
traversing the elevators andwalkways to get to the
commercial space that's locatednot at street level but, let's
say, on floor five or six.
Speaker 2 (14:20):
There are so many different ways that the
developers slice and dice theproperty now and even the
airspace right, and there's noone way to do it, and it's
become very creative in terms ofhow they deal with this.
They've evolved over time.
You could have the office atthe bottom and then a hotel
(14:41):
lobby, and then a residentialcondominium on top and then a
hotel at the very top level.
But you're right, all of theaccess and easement rights have
to be very carefully planned outand work with engineers in the
process of this, because one ofthe difficulties with these
projects is allocating theexpenses related to all of these
(15:04):
different components and makingsure that you are able to
allocate them according to whatyou've set forth in the
restrictive covenants, meaningthat your covenants actually
mesh or jive with what you setup on the ground and the access
rights and the utilities, so itbecomes very complicated.
Speaker 1 (15:25):
What's the biggest complaint you hear about the
allocation being unfair?
Speaker 2 (15:29):
The biggest complaints I've heard over the
years about the allocation isthat it's duplicative per se,
that residential owners or theminority owners believe that
they're paying for certainthings twice, three times,
because there are so many levelsof expenses or they have to pay
(15:51):
for property that they don'tuse.
Right, why am I paying for theelectric that serves the
restaurant?
And if they don't set this upon the ground properly, meaning
that there's not a separatemeter or a sub meter or that
somebody is reading the submeter or properly logging the
sub meter charges, that thesethings don't get allocated
(16:14):
properly.
So it's a very complicatedaccounting.
Speaker 1 (16:17):
How easy or difficult would it be to make an argument
that the inherent setup wasunconscionable from inception?
Speaker 2 (16:24):
I know those arguments have been made and a
lot of folks just don't likethis type of concept where the
traditional association doesn'tcontrol certain portions of a
building that have beentraditionally administered by
that association.
But I think it can work.
I think, just like a lot ofthings in life, if both parties
(16:47):
play fair, it works.
If you know what you're gettinginto, that's helpful, that you
don't misconstrue the situation.
If you know what you're gettinginto.
That's a huge part of thatissue.
Speaker 1 (17:01):
There are certain laws that apply to purely
residential condos and a wholedifferent set of laws that get
dragged in when we're talkingabout condo hotels and mixed-use
condos.
What are a few of the laws thatwouldn't typically apply to a
traditional residential condo,purely residential condo that
will apply in a mixed-use orcondo hotel?
Speaker 2 (17:24):
Well, one of the bigger ones that comes to mind
is that our traditionalassociations deal with the fair
housing laws right and in acommercial setting.
You're not dealing with that.
You're dealing with the ADA,the Americans with Disability
Act, and they both havedifferent standards and while
they're similar, they aredifferent.
(17:44):
I mean in terms of Florida realestate.
Here, if you're buying into ahotel condominium, for example,
it's a commercial property.
A lot of the time You're notgoing to get your homestead
exemption.
There's a different taxstructure, so there's a host of
tax-related issues.
I, I would presume, dealingwith that type of property.
(18:07):
You're dealing with differentlevel of maintenance
requirements, so it's adifferent animal.
Speaker 1 (18:15):
What about OSHA for restaurant workers in the condo
hotel?
Speaker 2 (18:20):
Yeah, if you know, if the association is dealing with
public spaces, restaurants,spas, now you're dealing with
all of those administrative laws.
It's a lot to manage.
That's why sometimes I do thinkthat having the business owner
managing some of this, they'remore set up to deal with a lot
(18:44):
of these complicated properties.
Speaker 1 (18:46):
I agree, but does the business owner, because
sometimes the naturalinclination is to kind of push
the potential liability off onsomeone else, right?
I think that's possibly justhuman nature in some of these
setups.
Have you seen any of thesecondo hotels or mixed use
property more the condo hotelwhere the condo board really has
(19:08):
little say over theadministration or management or
oversight of the amenities andyet they're still responsible,
potentially legally, ifsomething goes wrong?
Speaker 2 (19:20):
I mean that always could occur.
If something goes wrong on thecondominium property, yeah, on
the condominium property, yeah.
If you have condominiumproperty that you have no say in
what's going on and then you'reresponsible at the end of the
day, that's a problem.
Hopefully there are differentagreements out there that would
(19:41):
control that situation andprovide for some level of
indemnification or defense for alawsuit, but I don't know.
Speaker 1 (19:52):
You know, in some of these newer construction I mean,
we're seeing cranes everywhere,which is a good sign.
In South Florida and CentralFlorida, in other states as well
, you're seeing a lot ofconstruction.
Again, in a lot of casesthere's a public component to
this.
So I know in Miami there's apedestrian walkway around a lot
(20:14):
of the luxury high-rises and thecondos that are being
constructed.
Their owners, the association,is responsible to maintain that
pedestrian walkway, even thoughit's open to the public.
I mean, I'm thinking just offthe top of my head, the
insurance that you have to makesure you put in place to cover
that.
Speaker 2 (20:33):
Yeah, we see those situations as well, where you
have the street, where it haspublic meters right there but
the condo association isresponsible for the sidewalk and
you know dealing with slip andfalls that occur and that does
happen.
I mean sometimes you can shiftthe responsibility to some kind
(20:54):
of CDD.
You know community developmentdistrict in the area, but
oftentimes it falls on theassociation and you know you can
say that's not fair.
But going back to one of myprior points, you want to live
in that type of a, I would saycommunity right and a lot of
(21:17):
times that is how they aredeveloped and do the benefits of
being there sort of outweighthose other issues.
Speaker 1 (21:27):
Listen, that lifestyle comes with its own set
of challenges and costs, so Iagree with you.
I'm not sure how many peoplereally dig into those details,
though.
Speaker 2 (21:39):
And sometimes they're not discovered until a problem
happens.
Right, I mean, you know, evenif which, obviously you want to
have a lawyer involved in thesemore complicated type of
purchases and these new mixeduse and particularly hotel
condominium developments.
But you know, every issuecannot be expected or prevented,
(22:02):
for that matter.
I mean, once we know about it,we always try.
There's, you know, differentrisk management tools that you
can use, but it's there.
Speaker 1 (22:12):
So, given the highly amenitized communities we're
talking about, how do reserveswork?
Speaker 2 (22:17):
In some of the older traditional mixed-use
condominiums the reserves aresort of typical that you reserve
for you know the portions ofthe condo that you're required
to under the statute and now wehave a level of mandatory
reserves.
But where you have a buildingwhere, for example, the roof is
(22:38):
part of what I said is theshared facility, it's not part
of the condominium, it's ownedby some separate commercial
owner.
There is no requirement for thecondo or a unit owner to
reserve for that portion of theproperty or even maybe the
complete shell of the buildingright, because you're just
(22:58):
really own airspace.
So there is no reserverequirement under Florida law.
There's certainly no mandatoryrequirement under Florida law.
There may be an option that thecommercial owner has to collect
reserves through theirrestrictive covenants, but a lot
of them don't do that.
(23:18):
So you know, you don't knowwhen you're going to be hit with
the increased assessment forthe infrastructure in a lot of
these places and as a buyer youcertainly don't have the level
of disclosure that you would ina traditional condominium.
Speaker 1 (23:38):
That's troubling.
So the fact that we're seeingmore of these types of
communities and we've seen theemphasis in Florida upon fiscal
responsibility for sharedownership communities,
particularly multifamilybuildings Do you think the
legislature, in Florida at least, is going to get around to
(23:59):
requiring separate businessentities who manage condo hotels
, for example, to set upreserves?
So there is some continuity inthe budget, so people know
pretty much what theexpenditures are going to be
over the lifespan of certaincomponents.
Speaker 2 (24:15):
I would doubt it.
I just don't think that'shappening.
From what I hear from those inthe industry is that you know
they're professionals, they arein the business of managing
commercial projects.
They have to comply with lenderrequirements a lot of the time
(24:38):
that need certain inspections orcertain levels of maintenance,
and that's not necessary for acommercial property owner to you
know, have the state meddlingin their business operation at
that type of level.
So you know I'm not sayingthat's really my opinion, but
(25:00):
that's what those in theindustry I've heard from in
terms of why they don't need toreserve.
I mean there's no reserverequirement in Florida for
commercial, purely commercialcondos.
If you have an office, amedical condo, the mandatory
reserve laws don't apply.
So they kind of take the sameapproach there.
(25:23):
I'm not sure, from what I'veseen, of the management of those
projects.
It's really best case.
But that was the rationale thatI've heard.
Speaker 1 (25:32):
So it's an honor system for the business owner,
the flag operator, let's say,for purely residential, Not so
much.
The state doesn't really trustthem to be fiscally responsible
and stay on top of maintenance.
To be fiscally responsible andstay on top of maintenance, Look
(25:54):
for anybody who's been to morethan one hotel in their life.
They know that some are bettermaintained, cleaner, nicer,
fresher than others.
So I guess, Alison, we'll haveto see if the legislature
changes its mind about that.
Speaker 2 (26:06):
And this is particular with respect to
reserve requirements, is fineabout that.
Yeah, and this is particularwith respect to reserve
requirements.
I mean, there are the otherrequirements for building safety
inspections that do cross overa lot of the time to these type
of structures that we're talkingabout.
So they may get inspections forstructural problems, but for
the reserve aspect of it thereis no requirement.
Speaker 1 (26:28):
Of course reserve aspect of it.
There is no requirement.
Of course developers councilcould bake these requirements
into the governing documents.
Speaker 2 (26:34):
Well, a lot of times they have the option of
collecting the reserves, but I'mnot so sure a lot of them do,
or what they're really based on.
They're not tied to a certainsystem like we are for our
traditional condos, based onestimated remaining useful life
and how we deal with thattypically.
Speaker 1 (26:56):
Talk about the shared infrastructure.
We kind of touched on it before, but you've got, whether it's a
condo hotel or one of the newermixed use communities, which is
a condo inside a sharedfacility parking, elevators,
utilities.
What are some of the challenges?
Speaker 2 (27:14):
The challenges really include making sure that you
can actually administer theallocation based on what is
there.
I mean the documents are blackand white.
They say that you owe 30% ofthe shared facility expenses,
but actually being able to tiethat to what's on the ground
(27:35):
often becomes very difficult, asI mentioned, you know, in terms
of utilities, particularlytrying to deal with you know
what meter is tied to what partof the property.
A lot of the times evenpersonnel costs are debatable
how much time a certainindividual is serving X part of
(27:58):
the property versus Y part ofthe property.
So it's very difficult to sortof administer the allocation.
A lot of the times also, thecommercial operator isn't that
great at giving the associationthe budget.
What's the budget going to befor next year?
(28:19):
So the association's trying toplan for 2025 or 2026, and they
finally get it several monthsinto the year.
So it is very difficult for theassociation and then trickles
down to the owners to be able toplan because the communication
sometimes isn't there.
(28:39):
Sometimes it is, of course,dealing with you know, being
attorneys, we're a lot of thetime dealing with the more
difficult cases.
But that's what I've seen isthat the communication sometimes
is not as seamless as it shouldbe.
Speaker 1 (28:55):
Assuming that all the amenities Allison are really
placed in a shared component, ashared unit component.
What is the board's budget?
The association's budget shouldbe relatively low at that point
.
What are they really overseeing?
Speaker 2 (29:09):
Yes, the association's budget should be
very minimal.
It's management, insurance,attorney's fees, administrative
costs really.
So the bulk of the maintenance,even sometimes insurance, is
created by what I would say theshared facilities aspect of the
(29:31):
budget.
It drives the cost.
Speaker 1 (29:34):
You know, I said in the intro, one of the questions
we get a lot is who's reallymaking the decisions?
So let's say it's a condo hoteland the residents feel strongly
that there are some securitybreaches with hotel guests.
They don't have as tight ahandle as they should have in
terms of who's entering thebuilding, who's using the spa
(29:58):
and the gym and everything else.
What would be the typicalchannel for the board in a condo
hotel where they're hearingfrom the members the association
members that there are serioussecurity concerns?
What if the flag operatordisagrees?
Speaker 2 (30:14):
Well, you're going to go to the manager, right, and
try to talk about the concernsand you may or may not get
somewhere.
At that point you'll perhapshave to go to the next level of
really looking at thesedocuments to see what can and
cannot be enforced.
There's no statute that governsthis, so you're really in a
(30:36):
document type issue where youmight have to enforce.
If they provide that a certainlevel of security was promised,
you're off to enforcement.
If they provide that a certainrating of the property should be
kept, you're off to enforcement.
If they provide that this is aluxury property and these
(30:57):
problems are causing it to bemuch less luxurious than you
would have expected, you knowyou're off to enforcement, which
is not best case scenario.
It's expensive, right, andoftentimes you know that you're
the little guy and it's anuphill battle unless you have an
army behind you of other peoplewho are like-minded and want to
help fund this.
Speaker 1 (31:17):
There's been talk over the years Allison about
creating a separate condo hotelstatute.
Speaker 2 (31:23):
Is that still in the works or I don't know if there's
necessarily been talk about acondo hotel statute, but I
suppose the framework for thatwas imposed last year, in 2024,
when we had the adoption of thiscondominium within a building
statute in Florida, which sortof legitimized this concept of
(31:48):
minimal common elements andthings that were traditionally
common elements now being what'sknown as shared facilities
administered and operated bythis other third party, where
the owners really have very,very little control of what's
going on.
The hotel aspect adds anotherlayer in terms of rental
(32:08):
agreements and other certain youknow, administrative issues,
but that's like a twist onwhat's already now in the
statute.
Speaker 1 (32:20):
You know that just piqued my interest on something
else and you know we are seeinga lot more condo terminations in
Florida as older multifamilybuildings in fairly desirable
locations are starting to makethe decision that maybe they
don't want to continue.
Maybe the building is nearingits lifespan without having to
(32:40):
pump significant money intoimprovements and repairs in a
condo hotel setting.
These things are going to getold over time.
Let's fast forward two, three,four decades.
Who gets to make the decisionin a condo hotel to terminate
and sell the building?
Speaker 2 (32:57):
The condo owners would still make the decision,
but I would presume that thedocument would also provide for
some level of commercial owner,shared facility owner.
You know, super approval overthis right.
You can't just fracture theentire project, so I think
that's probably where it wouldlie.
Speaker 1 (33:20):
We'll see, because you know again, this is a great
new concept now I know it's beenaround for a while, but these
projects will age and with thatage will come new challenges.
I did want to talk to you aboutthe branding for the lifestyle
right.
So people want we're seeingthis whether it's a luxury
automobile brand that's throwingup buildings or it's being
(33:44):
associated with a luxury,upscale hotel flag.
How important is the brandingto these types of projects?
Speaker 2 (33:52):
in the hotel projects .
I think this is what generallygets people in the door right,
that they want to be part ofthis luxury brand generally gets
people in the door right thatthey want to be part of this
luxury brand.
They want to be part of thistrend.
People always want to be inwhat's hot and trendy, right?
So I think it's extremelyimportant in the hotel condo
side.
But we do see projects thatstart with one brand transform
(34:15):
into some other brand at a latertime, right into some other
brand at a later time, right?
I think that as long as youstick with the sort of same
level of you know, four diamonds, five stars, generally it's
going to be allowed under therestrictive covenants that I've
seen, but I think it'sdefinitely important.
(34:35):
Going back to one of the pointsyou made, those who buy into
these communities, hotel condos,just regular mixed use projects
obviously need to understandthat.
You know you can't keep acommercial business there
forever.
So you said I want to be inthis project because there's a
Whole Foods.
I mean, whole Foods is doingreally pretty well, I think,
(34:57):
right now, but there could be apoint where it's turned into a
bowling alley, right.
So you have to roll with it.
Speaker 1 (35:04):
I guess I would say Well, and unlike a traditional
condo where we've got materialalteration provisions, where
right now we're seeing peopleconvert tennis courts into
pickleball courts and as thelifestyle choices change to your
point, it's a whole differentballgame.
When it comes to the commercialunits, it's not going to be.
That requires a certainpercentage approval of the
(35:29):
residential owners if there'sgoing to be a different use for
that.
But I want to circle back againon the condo hotel and the
branding.
Do you think people are buyingthem as an investment or as a
lifestyle choice?
Speaker 2 (35:42):
I think it can be both.
I think that some may purchasea hotel condo where they like
the project, they like the brand, they like the location and
they know they want to go therefor a week during the year.
And they think, you know, letme just, I'll just purchase this
unit with the rentaldistribution It'll hopefully
like, pay for itself and allowme to be there for the time
(36:06):
period where I want to be there.
I think that's a certainpercentage of the purchases that
we see.
I think some of the other onesare that they just like the
amenities, especially in thevery high-end projects, that
they like these amenities.
They want to be there on a morefull-time basis and they're
willing to pay for the costsassociated with these type of
(36:29):
projects.
Speaker 1 (36:30):
Have you seen restrictions baked into the
documents that say you cannot gofrom a five-star hotel brand to
a two-star motel brand?
Speaker 2 (36:39):
I mean, are there built in safeguards?
Yeah, those are in there, butyou know just like everything it
has to be enforced.
Good point.
Speaker 1 (36:47):
These condo hotels, Allison, I thought I saw one set
of documents that prohibitedfull time occupancy.
Speaker 2 (36:53):
That is generally a zoning kind of thing, because I
think for you to be in that sortof class there's going to be a
restriction on full-timeoccupancy.
But it also could be that inyour rental management agreement
that you can't be there duringthe peak times of the year.
(37:14):
So it's sort of different butsimilar, and I think that that's
something you'd want to look atand see if you're okay with
those type of terms.
But in my experience it's nevergoing to be at the true hotel
condominiums.
You're not going to be able tostay there full time.
Speaker 1 (37:31):
Let's talk about rental pools, mandatory rental
pools you mentioned.
You know.
The owner buys the unit, maycome down one or two weeks a
year.
The rest of the year.
Owner buys the unit, may comedown one or two weeks a year,
the rest of the year.
I imagine if they want to turnthat asset into an income
producing asset, they'll have torent it out and often they must
do so only through a mandatoryrental pool that's operated.
(37:52):
Is that operated by the condoboard or by the hotel?
Speaker 2 (37:56):
operator.
It can be either in the olderprojects Sometimes the
association controls it, but inthe newer projects it's through
the hotel owner and the flagright.
So I think it can be a reallygood thing.
I think when most or all of theowners participate in the
(38:18):
program and the program, justlike everything, is administered
fairly, there's a fairalgorithm for the rental of
units.
You are, you know, you get adecent distribution.
It can be a really good thing.
You know, we always do hear ofissues where you know
refurbishment that comes up alot, where you're constantly
(38:39):
getting hit for some renovationcost because there's a lot of
traffic.
I mean it takes a lot to have ahigh quality project.
If too many people leave therental program it's not going to
be profitable for the operatorand they might walk away.
And you know what?
In my experience that hasgenerally been a detriment to
(39:01):
the project because it justresults in like a hodgepodge of
guest experiences.
Speaker 1 (39:07):
So if you want to be at a luxury project.
Speaker 2 (39:11):
I think oftentimes to have the one rental program is
going to be in the benefit.
If you're going to be at not aluxury, not a luxury project,
then maybe the you know mom andpop kind of type management and
different managers could workout.
Speaker 1 (39:29):
Well, let's talk about the guest experience.
So it would be possible that Iwant to book a room at the Four
Seasons and it's a condo hotel,right, and I could possibly get
an owned a unit that's owned bysomeone, but do I go to the unit
and it's got their familyphotos all over, so I feel like
I'm in an Airbnb as opposed to ahotel room.
Speaker 2 (39:51):
It may be that way at certain projects.
Again, the luxury projects willhave all the restrictions in
place to prevent that fromoccurring, right that they're
not going to allow that to occurbecause that negatively affects
their brand.
They're not going to let thatoccur.
So you know it's probably notgoing to be at that luxury
resort that you'll see that.
(40:11):
But in other types of projects,like you, you may see that.
You know you may meet agentleman or a woman in the
parking lot to get your keyrather than go to the front desk
, and you know, like youtraditionally would.
So you know it just depends andyou know, if you have a high,
(40:34):
you know, if you have a luxurybrand, they're not going to want
that.
Speaker 1 (40:37):
So what would be your advice to our listeners who are
have thought about a potentialpurchase in a mixed use condo or
a condo hotel?
For them to make an informedpurchase decision.
Allison what's what's?
Speaker 2 (40:50):
some of your best tips.
Well, of course, you want toget your attorney involved like
early on.
Speaker 1 (40:55):
Wait, let me wait, let me stop you right there.
Do you know how I used to doreal estate commercial and
resident as an attorney?
I don't think a lot of peopleactually use attorneys to
purchase property and I'mtalking even units that are one,
12, 20 million dollars.
I mean, I often see when I askwho's your attorney, they're
(41:17):
using a closing agent.
When I ask who's your attorney,they're using a closing agent.
Speaker 2 (41:25):
So the first hurdle is educating people that you
really need to use an attorneywhen you're purchasing real
property.
You're right, and it's not justmaybe it's not the attorney that
you may have used for otherpurchases.
You might have bought a lot ofcondos and a lot of residential
property in Florida or elsewhere, but with these very specific,
complicated properties, havingsomebody with the knowledge of
in-condo law becomes, you know,vastly more important than
(41:48):
understanding some of theseother issues.
And a lot of the attorneys whoare even board certified in
condo law frankly don't dealwith these types of properties.
So you know it's a veryspecialized group of people who
really have the ins and outs tothese types of properties.
So get somebody with thespecialized knowledge that
understands these types ofproperties so you can go in eyes
(42:11):
wide open and understand whatthe obligations are, what you do
and don't have control overyour level of input that you
have or don't have in thecommunity.
You know, as mentioned, likewhat does the you know and
otherwise, what does theproperty look like at night and
just those typical issues, whattype of amenities you have use
(42:35):
of.
Not on some kind of extramembership basis, because, as
you know, a lot of theseprojects have another layer of
membership that you may have toacquire to really receive the
amenities that you thought thatyou were entitled to.
So there's kind of layer uponlayer of complexities here, and
(42:56):
if you're okay with that, thenthese are for you, and they're
not all this highly complicated,but a lot are.
Speaker 1 (43:04):
That's really good advice.
Mixed-use developments do youthink they're growing in
popularity?
Speaker 2 (43:09):
I think they are growing in popularity there's.
You know where we are, at leastin the Southeast Florida right
there's not that much buildableland anymore, so you have to
sort of go up A lot of theredevelopment we're seeing in
terms of projects that areterminated or new projects.
Are these amenity communitiesor like little mini cities
(43:34):
almost right, where people likethat, they desire to have more
access to the stores andbusinesses that they want.
People want the convenience ofit and I think they like being
in these trendy, new, a lot ofthe time very beautiful projects
.
Speaker 1 (43:53):
You know it's funny.
I always used to think of them,as you know, being in more
heavily populated areas, but Iwas recently representing a
large mixed-use community andit's a very rural part of
Central Florida and, like yousaid, it's like a little
self-contained village almost.
Speaker 2 (44:11):
Yes, I think that is what we will see as property is
redeveloped.
I mean developers want tomaximize profits and have the
continuous rent associated withthe commercial aspects of the
property.
I think is probably attractiveas well.
And as to the other side, youknow, people like us want to be
(44:33):
able to access all of theamenities and sort of be part of
the community.
Right, that's probably a factoras well.
Speaker 1 (44:41):
Definitely an appeal.
Well, allison, I really want tothank you for spending time
with me on this episode.
We continue to see more ofthese type of mixed use
developments and condo hotelscrop up, and I think it's really
important for sellers, peoplewho are reselling, people who
are purchasing new constructionto understand what unique
(45:03):
housing options these are.
Speaker 2 (45:05):
Thank you, donna.
Thanks for having me.
I think this is an importanttopic for everyone to hear and
understand, that it's not justone size fits all when it comes
to condo projects out there.
Thanks, allison.
Speaker 1 (45:25):
Thank you for joining us today.
Don't forget to follow and rateus on your favorite podcast
platform, or visitTakeItToTheBoardcom for more
ways to connect.
Hi everyone, I'm attorney Donna DiMaggio-Berger
and this is Take it to the Boardwhere we speak condo and HOA.
Today, we're going to betalking about two types of
housing options which requireserious deliberation on the part
of potential purchasersmixed-use communities and condo
hotels.
Living in a mixed-usecondominium, where residential
(00:22):
units share space withcommercial businesses like
retail shops, restaurants oroffices, offers both benefits
and challenges.
Choosing to live in a mixed-usecommunity requires careful
consideration of noise,commercial activity and
governance structure.
Before buying, prospectiveresidents should review the
condominium documents,understand any restrictions and
(00:43):
assess how the commercialcomponents will impact daily
life.
Now, condo hotels can be agreat option for buyers seeking
a vacation property with rentalpotential, but they also require
careful consideration of costs,restrictions and long-term
investment value.
Anyone considering a condohotel in Florida should review
the management agreement, therental program terms and
(01:04):
financial obligations beforecommitting.
Some common questions about bothof these housing options
include how do boards balancethe competing interest of
homeowners and business owners?
Are condo hotels a goodinvestment, and who really
controls the decision making inthese unique properties?
To help us answer thesequestions, I'm joined today by
my colleague, allison Hertz, aseasoned community association
(01:26):
attorney who has served invarious key roles with the
Florida Bar, including as theco-chair of the Condominium and
Plan Development Law Committeeof the Real Property Probate and
Trust Section of the FloridaBar.
That's a real mouthful Allison.
Allison, welcome to Take it tothe Board.
Speaker 2 (01:42):
Thank you, good to be here.
Speaker 1 (01:44):
So let's start with the basics, because not
everybody may be familiar withthese housing options and they
may not even have taken hold,you know, everywhere in the US.
So what defines a mixed-usecommunity and how does it differ
from a traditional condo or HOA?
Speaker 2 (02:00):
There are so many places that we go today that are
mixed use that people probablydon't even realize it's the old
don't judge a book by its covertype thing that you know
downtown buildings, hotels,highly amenitized community
shopping centers, residentialcomponents generally under the
(02:23):
umbrella of certain restrictivecovenants governing the whole
project.
In Florida we have thetraditional mixed-use
condominium and that's sort ofbecoming more rare where a
condominium association governsthe project.
Now it's more typical to havethose separated, where there may
(02:43):
be a condominium within abuilding and the typical common
elements or shared space isoperated by a separate business
owner and there's this sharedfacility concept that we have
now here in Florida.
Speaker 1 (03:00):
Florida.
I want to talk about both, butlet's start with the traditional
mixed-use condo where you'vegot a volunteer condominium
board of directors and they'reoverseeing a residential.
Let's say it's a seven-storybuilding, there's 80 units and
then on the ground floor there'sseven commercial units.
Now I have driven by those typeof communities and thought, wow
(03:22):
, that would be so convenient tohave a Whole Foods in my
building.
I could just pop down, have aspa service next door, you can
get your nails done.
It seems like it's such a greatlifestyle.
However, you and I know ascommunity association attorneys
that appearances can bedeceiving and that there's a lot
of things going on behind thescenes, a lot of tensions at
(03:44):
times between the commercialusage and the residential.
So for those traditional, whereyou've got that volunteer board
, how do they?
Speaker 2 (03:53):
navigate that Well.
I think many coexist in harmonyand the board does a good job
of managing both sides andmaking sure the interests are
protected and preserved bothsides and making sure the
interests are protected andpreserved.
There's always like thatnatural tension between the
sides and the traditional setuphere.
Boards need to understand andhave like a shared vision
(04:15):
between both sides of theproject here, because the
success of one side of theproject commercial is definitely
going to, you know, rely on thesuccess of the residential and
vice versa here.
So boards need to be realisticthat the commercial owner needs
to make money.
These commercial businessesneed to make money and a profit
(04:37):
in order to be successful.
However, the commercial ownersshould not be able to do that to
the detriment of theresidential portion of the
project.
So I'm not saying it's easy,but there is a way to do this
and there is a way to fairlybalance both sides of the
project so they can coexist.
(04:59):
We do see that.
You know there are problems aswell.
Speaker 1 (05:02):
In the mixed-use condos I've represented.
I don't think I've had anycommercial unit owners on the
board, which is unusual to mebecause they do have a very
vested interest in how theassociation is run.
Have you had commercial unitowners on the boards in your
mixed-use condos?
Speaker 2 (05:22):
I have, but I do.
I agree that it's rare thatthey're so focused on running
their business and most of thetime the residential owners do a
good job with the managementand administration that they
don't really feel like they needto get that highly involved
when the commercial units arenot so great in number.
Speaker 1 (05:42):
We have a statute in Florida, 718-404.
It's very brief, statutoryprovision, not lengthy, but it
does talk about a few things.
Can you tell us about that?
Speaker 2 (05:53):
Their statute exists regarding mixed-use condominiums
, and the bulk of it was fromthe mid-90s, where the statute
now protects residential ownersin a way, by stating that the
commercial owner cannot vetoamendments to the condominium
documents and they cannotcontrol the board if there are
(06:16):
more residential units thancommercial units.
So it was put in place toprotect owners from the
monopolization of the board bycommercial owners, which in a
traditional mixed-use project wereally don't see that much
anyway.
Speaker 1 (06:32):
That statute was intended to have retroactive
application correct.
Speaker 2 (06:36):
It was intended to have retroactive application but
we know that the court deemedit not to apply.
It materially altered votingrights and vested rights so it
was not deemed to be retroactive, although it attempted to be
retroactive, which we see a lotin the Florida law.
Speaker 1 (06:56):
So I'm sure you've heard this complaint before in a
mixed-use condo, which is, look, it just seems unfair that.
You know, as a residentialowner, I have leasing
restrictions.
I have to get my tenantsapproved right.
I have to do certain things,like you know provide a security
(07:17):
, a common area security deposit.
It's, you know, a 30-dayapproval process, sometimes even
lengthier, and my commercialunit owner next door or down
below doesn't have to do thesethings.
The same thing with alterations.
So in a lot of these and Ithink it's in older documents
but there's an exemption for thecommercial owners when it comes
(07:40):
to exterior alterations,signage, even landscaping.
I did have one client that hada very lengthy battle regarding
landscaping that the commercialowner put in place that did not
at all blend in with the rest ofthe community's landscaping.
Do the Florida statutes provideany cover in that case?
Speaker 2 (07:59):
Not necessarily.
I would say that's a documentissue right, what the
condominium documents haveconcerning all of these
restrictions.
And realistically, you need tobe able to entice tenants as a
commercial owner a lot of thetime and they need to be able to
operate and make residentialowners.
(08:23):
I mean, I do hear fromcolleagues that represent these
type of parties that they needcertain flexibility in place to
maximize their occupancy in thecondominium.
So they do, I suppose, get acertain level of special
treatment built into thedocuments and kind of is one of
those.
(08:43):
It is what it is type things.
Yes, there can be constraintsto what they do, but oftentimes
they do get this specialtreatment and frankly, I think
the residential owners buy inthese types of projects because
of the commercial amenities thatmight be available there.
(09:05):
So they, you know, while theycould change over time, they do
like these amenities and they'rethere because they want access
to these commercial amenitiesand different stores,
restaurants, you know youmentioned salons and med spas
and all kinds of things.
Speaker 1 (09:22):
Yeah, I think you're right, but I think a lot of
people may not dig deeper.
So, you know, we've had acouple of recent guests, we had
the former ombudsman, we had ananonymous owner in a luxury
building and a lot of times wefind that potential purchasers
they're really focusing on a fewthings.
They're focusing on thelifestyle experience.
(09:43):
Wow, wouldn't it be great tojust I'm cooking, I ran out of
something.
Oh, there's a Whole Foods downat the bottom of this building.
Just go pop in.
Or you know, whatever I nail wesaid hair, whatever it is
workout, Pilates but are theydigging deeper in terms of the
restrictions on those commercialunits, noise, the length of
hours of operation for some ofthose businesses?
(10:05):
Yeah, restaurants, great, butlet's talk about that.
How many potential purchasers,Allison, do you think, who live
in that mixed use building andthey may love the restaurant
below, but have they consideredwhat potential noise issues may
arise?
Speaker 2 (10:23):
And parking right.
That's a huge one.
Parking issues come up all thetime.
All of those issues areimportant to go in with your
eyes wide open as to what thisreally is.
Is there valet requirements?
What am I paying in terms ofparking?
How many vehicles can I haveAccess issues?
Do I get to enter the buildingthrough the point of entry that
(10:44):
I think I get to enter through,or is that only for hotel guests
?
So noises, smells, you knowwhat, if there's a nightclub at
the top floor of the buildingand there's, you know, after
hours, noise, see, when youvisit the building at 12 noon
(11:08):
are perhaps not the same as whenyou go at 10 pm, when it starts
the hustle and bustle of, like,the nightlife, particularly in
our urban city areas.
Speaker 1 (11:13):
The change also you know, the seven commercial
businesses you see operatingwhen you purchase may not be the
same seven businesses.
A decade from now.
There could potentially be a7-Eleven open 24 hours selling
lottery tickets and beer, andyou never intended that for your
building.
Is there any way to protectyourself from those kinds of
(11:34):
changes?
Speaker 2 (11:35):
I mean you would hope that the type of use would be
set forth in the controllingdocuments as to what type of use
the commercial units can be.
You know what can be there,right?
Is it going to be a subway?
I don't want to smellsandwiches being made all day
when I enter into the building,and some of them do address
(11:56):
these use restrictions.
Some of the older ones reallydon't.
So I think that's somethingimportant to look at, and
obviously they change over time.
I mean, the developers do areally good job of writing these
documents and trying to predictthe future in terms of how
things could change at theproject, but you just can't
(12:17):
anticipate every single thingthat may happen.
You know, 20 years later.
Speaker 1 (12:22):
So in some of our golf course communities I live
on a golf course community andthis has been driven home it's a
symbiotic relationship.
So if you've got a healthycountry club, let's say it's a
private club.
The club facilities are notcommon areas for the homeowners
association.
But you want a vibrant clubbecause again, symbiotic
(12:44):
relationship.
You want a vibrant club because, again, symbiotic relationship.
Is it similar in mixed use?
I mean, if you came to thebuilding and you had six of the
seven commercial units vacant,empty, what kind of impact does
that have on the building?
Speaker 2 (12:55):
Yeah, no one wants to see empty space.
It's just a bad look, right?
It just appears that somethingis wrong when it may not be.
It might be in a transition,but it also may cause the
commercial owner to struggle interms of paying for their
obligations.
That is not something that theother owners want to see and
(13:16):
they don't want to have to pickup the cost.
It also, you know the change inoccupancy.
This continuous change is nothelpful.
The units have to be built out.
There's construction, there'snoise.
It's a nuisance to the adjacentowners.
So having some level ofoccupancy is good.
The 7-Eleven or the subway, youknow, might not be what you
(13:38):
want to see.
I'm not sure.
I think I might rather have avacant space.
It just depends.
You know, being a lawyer, itdepends, right, it's a bad look.
Speaker 1 (13:47):
So I've sort of been referencing the commercial
spaces as being at the streetlevel, which is typical for some
of the traditional mixed-usecondos, but that's not always
the case, right?
So sometimes the offices are onhigher floors in a multifamily
building.
I got to imagine there's awhole different set of
challenges with that when you'vegot the general public
(14:09):
traversing the elevators andwalkways to get to the
commercial space that's locatednot at street level but, let's
say, on floor five or six.
Speaker 2 (14:20):
There are so many different ways that the
developers slice and dice theproperty now and even the
airspace right, and there's noone way to do it, and it's
become very creative in terms ofhow they deal with this.
They've evolved over time.
You could have the office atthe bottom and then a hotel
(14:41):
lobby, and then a residentialcondominium on top and then a
hotel at the very top level.
But you're right, all of theaccess and easement rights have
to be very carefully planned outand work with engineers in the
process of this, because one ofthe difficulties with these
projects is allocating theexpenses related to all of these
(15:04):
different components and makingsure that you are able to
allocate them according to whatyou've set forth in the
restrictive covenants, meaningthat your covenants actually
mesh or jive with what you setup on the ground and the access
rights and the utilities, so itbecomes very complicated.
Speaker 1 (15:25):
What's the biggest complaint you hear about the
allocation being unfair?
Speaker 2 (15:29):
The biggest complaints I've heard over the
years about the allocation isthat it's duplicative per se,
that residential owners or theminority owners believe that
they're paying for certainthings twice, three times,
because there are so many levelsof expenses or they have to pay
(15:51):
for property that they don'tuse.
Right, why am I paying for theelectric that serves the
restaurant?
And if they don't set this upon the ground properly, meaning
that there's not a separatemeter or a sub meter or that
somebody is reading the submeter or properly logging the
sub meter charges, that thesethings don't get allocated
(16:14):
properly.
So it's a very complicatedaccounting.
Speaker 1 (16:17):
How easy or difficult would it be to make an argument
that the inherent setup wasunconscionable from inception?
Speaker 2 (16:24):
I know those arguments have been made and a
lot of folks just don't likethis type of concept where the
traditional association doesn'tcontrol certain portions of a
building that have beentraditionally administered by
that association.
But I think it can work.
I think, just like a lot ofthings in life, if both parties
(16:47):
play fair, it works.
If you know what you're gettinginto, that's helpful, that you
don't misconstrue the situation.
If you know what you're gettinginto.
That's a huge part of thatissue.
Speaker 1 (17:01):
There are certain laws that apply to purely
residential condos and a wholedifferent set of laws that get
dragged in when we're talkingabout condo hotels and mixed-use
condos.
What are a few of the laws thatwouldn't typically apply to a
traditional residential condo,purely residential condo that
will apply in a mixed-use orcondo hotel?
Speaker 2 (17:24):
Well, one of the bigger ones that comes to mind
is that our traditionalassociations deal with the fair
housing laws right and in acommercial setting.
You're not dealing with that.
You're dealing with the ADA,the Americans with Disability
Act, and they both havedifferent standards and while
they're similar, they aredifferent.
(17:44):
I mean in terms of Florida realestate.
Here, if you're buying into ahotel condominium, for example,
it's a commercial property.
A lot of the time You're notgoing to get your homestead
exemption.
There's a different taxstructure, so there's a host of
tax-related issues.
I, I would presume, dealingwith that type of property.
(18:07):
You're dealing with differentlevel of maintenance
requirements, so it's adifferent animal.
Speaker 1 (18:15):
What about OSHA for restaurant workers in the condo
hotel?
Speaker 2 (18:20):
Yeah, if you know, if the association is dealing with
public spaces, restaurants,spas, now you're dealing with
all of those administrative laws.
It's a lot to manage.
That's why sometimes I do thinkthat having the business owner
managing some of this, they'remore set up to deal with a lot
(18:44):
of these complicated properties.
Speaker 1 (18:46):
I agree, but does the business owner, because
sometimes the naturalinclination is to kind of push
the potential liability off onsomeone else, right?
I think that's possibly justhuman nature in some of these
setups.
Have you seen any of thesecondo hotels or mixed use
property more the condo hotelwhere the condo board really has
(19:08):
little say over theadministration or management or
oversight of the amenities andyet they're still responsible,
potentially legally, ifsomething goes wrong?
Speaker 2 (19:20):
I mean that always could occur.
If something goes wrong on thecondominium property, yeah, on
the condominium property, yeah.
If you have condominiumproperty that you have no say in
what's going on and then you'reresponsible at the end of the
day, that's a problem.
Hopefully there are differentagreements out there that would
(19:41):
control that situation andprovide for some level of
indemnification or defense for alawsuit, but I don't know.
Speaker 1 (19:52):
You know, in some of these newer construction I mean,
we're seeing cranes everywhere,which is a good sign.
In South Florida and CentralFlorida, in other states as well
, you're seeing a lot ofconstruction.
Again, in a lot of casesthere's a public component to
this.
So I know in Miami there's apedestrian walkway around a lot
(20:14):
of the luxury high-rises and thecondos that are being
constructed.
Their owners, the association,is responsible to maintain that
pedestrian walkway, even thoughit's open to the public.
I mean, I'm thinking just offthe top of my head, the
insurance that you have to makesure you put in place to cover
that.
Speaker 2 (20:33):
Yeah, we see those situations as well, where you
have the street, where it haspublic meters right there but
the condo association isresponsible for the sidewalk and
you know dealing with slip andfalls that occur and that does
happen.
I mean sometimes you can shiftthe responsibility to some kind
(20:54):
of CDD.
You know community developmentdistrict in the area, but
oftentimes it falls on theassociation and you know you can
say that's not fair.
But going back to one of myprior points, you want to live
in that type of a, I would saycommunity right and a lot of
(21:17):
times that is how they aredeveloped and do the benefits of
being there sort of outweighthose other issues.
Speaker 1 (21:27):
Listen, that lifestyle comes with its own set
of challenges and costs, so Iagree with you.
I'm not sure how many peoplereally dig into those details,
though.
Speaker 2 (21:39):
And sometimes they're not discovered until a problem
happens.
Right, I mean, you know, evenif which, obviously you want to
have a lawyer involved in thesemore complicated type of
purchases and these new mixeduse and particularly hotel
condominium developments.
But you know, every issuecannot be expected or prevented,
(22:02):
for that matter.
I mean, once we know about it,we always try.
There's, you know, differentrisk management tools that you
can use, but it's there.
Speaker 1 (22:12):
So, given the highly amenitized communities we're
talking about, how do reserveswork?
Speaker 2 (22:17):
In some of the older traditional mixed-use
condominiums the reserves aresort of typical that you reserve
for you know the portions ofthe condo that you're required
to under the statute and now wehave a level of mandatory
reserves.
But where you have a buildingwhere, for example, the roof is
(22:38):
part of what I said is theshared facility, it's not part
of the condominium, it's ownedby some separate commercial
owner.
There is no requirement for thecondo or a unit owner to
reserve for that portion of theproperty or even maybe the
complete shell of the buildingright, because you're just
(22:58):
really own airspace.
So there is no reserverequirement under Florida law.
There's certainly no mandatoryrequirement under Florida law.
There may be an option that thecommercial owner has to collect
reserves through theirrestrictive covenants, but a lot
of them don't do that.
(23:18):
So you know, you don't knowwhen you're going to be hit with
the increased assessment forthe infrastructure in a lot of
these places and as a buyer youcertainly don't have the level
of disclosure that you would ina traditional condominium.
Speaker 1 (23:38):
That's troubling.
So the fact that we're seeingmore of these types of
communities and we've seen theemphasis in Florida upon fiscal
responsibility for sharedownership communities,
particularly multifamilybuildings Do you think the
legislature, in Florida at least, is going to get around to
(23:59):
requiring separate businessentities who manage condo hotels
, for example, to set upreserves?
So there is some continuity inthe budget, so people know
pretty much what theexpenditures are going to be
over the lifespan of certaincomponents.
Speaker 2 (24:15):
I would doubt it.
I just don't think that'shappening.
From what I hear from those inthe industry is that you know
they're professionals, they arein the business of managing
commercial projects.
They have to comply with lenderrequirements a lot of the time
(24:38):
that need certain inspections orcertain levels of maintenance,
and that's not necessary for acommercial property owner to you
know, have the state meddlingin their business operation at
that type of level.
So you know I'm not sayingthat's really my opinion, but
(25:00):
that's what those in theindustry I've heard from in
terms of why they don't need toreserve.
I mean there's no reserverequirement in Florida for
commercial, purely commercialcondos.
If you have an office, amedical condo, the mandatory
reserve laws don't apply.
So they kind of take the sameapproach there.
(25:23):
I'm not sure, from what I'veseen, of the management of those
projects.
It's really best case.
But that was the rationale thatI've heard.
Speaker 1 (25:32):
So it's an honor system for the business owner,
the flag operator, let's say,for purely residential, Not so
much.
The state doesn't really trustthem to be fiscally responsible
and stay on top of maintenance.
To be fiscally responsible andstay on top of maintenance, Look
(25:54):
for anybody who's been to morethan one hotel in their life.
They know that some are bettermaintained, cleaner, nicer,
fresher than others.
So I guess, Alison, we'll haveto see if the legislature
changes its mind about that.
Speaker 2 (26:06):
And this is particular with respect to
reserve requirements, is fineabout that.
Yeah, and this is particularwith respect to reserve
requirements.
I mean, there are the otherrequirements for building safety
inspections that do cross overa lot of the time to these type
of structures that we're talkingabout.
So they may get inspections forstructural problems, but for
the reserve aspect of it thereis no requirement.
Speaker 1 (26:28):
Of course reserve aspect of it.
There is no requirement.
Of course developers councilcould bake these requirements
into the governing documents.
Speaker 2 (26:34):
Well, a lot of times they have the option of
collecting the reserves, but I'mnot so sure a lot of them do,
or what they're really based on.
They're not tied to a certainsystem like we are for our
traditional condos, based onestimated remaining useful life
and how we deal with thattypically.
Speaker 1 (26:56):
Talk about the shared infrastructure.
We kind of touched on it before, but you've got, whether it's a
condo hotel or one of the newermixed use communities, which is
a condo inside a sharedfacility parking, elevators,
utilities.
What are some of the challenges?
Speaker 2 (27:14):
The challenges really include making sure that you
can actually administer theallocation based on what is
there.
I mean the documents are blackand white.
They say that you owe 30% ofthe shared facility expenses,
but actually being able to tiethat to what's on the ground
(27:35):
often becomes very difficult, asI mentioned, you know, in terms
of utilities, particularlytrying to deal with you know
what meter is tied to what partof the property.
A lot of the times evenpersonnel costs are debatable
how much time a certainindividual is serving X part of
(27:58):
the property versus Y part ofthe property.
So it's very difficult to sortof administer the allocation.
A lot of the times also, thecommercial operator isn't that
great at giving the associationthe budget.
What's the budget going to befor next year?
(28:19):
So the association's trying toplan for 2025 or 2026, and they
finally get it several monthsinto the year.
So it is very difficult for theassociation and then trickles
down to the owners to be able toplan because the communication
sometimes isn't there.
(28:39):
Sometimes it is, of course,dealing with you know, being
attorneys, we're a lot of thetime dealing with the more
difficult cases.
But that's what I've seen isthat the communication sometimes
is not as seamless as it shouldbe.
Speaker 1 (28:55):
Assuming that all the amenities Allison are really
placed in a shared component, ashared unit component.
What is the board's budget?
The association's budget shouldbe relatively low at that point
.
What are they really overseeing?
Speaker 2 (29:09):
Yes, the association's budget should be
very minimal.
It's management, insurance,attorney's fees, administrative
costs really.
So the bulk of the maintenance,even sometimes insurance, is
created by what I would say theshared facilities aspect of the
(29:31):
budget.
It drives the cost.
Speaker 1 (29:34):
You know, I said in the intro, one of the questions
we get a lot is who's reallymaking the decisions?
So let's say it's a condo hoteland the residents feel strongly
that there are some securitybreaches with hotel guests.
They don't have as tight ahandle as they should have in
terms of who's entering thebuilding, who's using the spa
(29:58):
and the gym and everything else.
What would be the typicalchannel for the board in a condo
hotel where they're hearingfrom the members the association
members that there are serioussecurity concerns?
What if the flag operatordisagrees?
Speaker 2 (30:14):
Well, you're going to go to the manager, right, and
try to talk about the concernsand you may or may not get
somewhere.
At that point you'll perhapshave to go to the next level of
really looking at thesedocuments to see what can and
cannot be enforced.
There's no statute that governsthis, so you're really in a
(30:36):
document type issue where youmight have to enforce.
If they provide that a certainlevel of security was promised,
you're off to enforcement.
If they provide that a certainrating of the property should be
kept, you're off to enforcement.
If they provide that this is aluxury property and these
(30:57):
problems are causing it to bemuch less luxurious than you
would have expected, you knowyou're off to enforcement, which
is not best case scenario.
It's expensive, right, andoftentimes you know that you're
the little guy and it's anuphill battle unless you have an
army behind you of other peoplewho are like-minded and want to
help fund this.
Speaker 1 (31:17):
There's been talk over the years Allison about
creating a separate condo hotelstatute.
Speaker 2 (31:23):
Is that still in the works or I don't know if there's
necessarily been talk about acondo hotel statute, but I
suppose the framework for thatwas imposed last year, in 2024,
when we had the adoption of thiscondominium within a building
statute in Florida, which sortof legitimized this concept of
(31:48):
minimal common elements andthings that were traditionally
common elements now being what'sknown as shared facilities
administered and operated bythis other third party, where
the owners really have very,very little control of what's
going on.
The hotel aspect adds anotherlayer in terms of rental
(32:08):
agreements and other certain youknow, administrative issues,
but that's like a twist onwhat's already now in the
statute.
Speaker 1 (32:20):
You know that just piqued my interest on something
else and you know we are seeinga lot more condo terminations in
Florida as older multifamilybuildings in fairly desirable
locations are starting to makethe decision that maybe they
don't want to continue.
Maybe the building is nearingits lifespan without having to
(32:40):
pump significant money intoimprovements and repairs in a
condo hotel setting.
These things are going to getold over time.
Let's fast forward two, three,four decades.
Who gets to make the decisionin a condo hotel to terminate
and sell the building?
Speaker 2 (32:57):
The condo owners would still make the decision,
but I would presume that thedocument would also provide for
some level of commercial owner,shared facility owner.
You know, super approval overthis right.
You can't just fracture theentire project, so I think
that's probably where it wouldlie.
Speaker 1 (33:20):
We'll see, because you know again, this is a great
new concept now I know it's beenaround for a while, but these
projects will age and with thatage will come new challenges.
I did want to talk to you aboutthe branding for the lifestyle
right.
So people want we're seeingthis whether it's a luxury
automobile brand that's throwingup buildings or it's being
(33:44):
associated with a luxury,upscale hotel flag.
How important is the brandingto these types of projects?
Speaker 2 (33:52):
in the hotel projects .
I think this is what generallygets people in the door right,
that they want to be part ofthis luxury brand generally gets
people in the door right thatthey want to be part of this
luxury brand.
They want to be part of thistrend.
People always want to be inwhat's hot and trendy, right?
So I think it's extremelyimportant in the hotel condo
side.
But we do see projects thatstart with one brand transform
(34:15):
into some other brand at a latertime, right into some other
brand at a later time, right?
I think that as long as youstick with the sort of same
level of you know, four diamonds, five stars, generally it's
going to be allowed under therestrictive covenants that I've
seen, but I think it'sdefinitely important.
(34:35):
Going back to one of the pointsyou made, those who buy into
these communities, hotel condos,just regular mixed use projects
obviously need to understandthat.
You know you can't keep acommercial business there
forever.
So you said I want to be inthis project because there's a
Whole Foods.
I mean, whole Foods is doingreally pretty well, I think,
(34:57):
right now, but there could be apoint where it's turned into a
bowling alley, right.
So you have to roll with it.
Speaker 1 (35:04):
I guess I would say Well, and unlike a traditional
condo where we've got materialalteration provisions, where
right now we're seeing peopleconvert tennis courts into
pickleball courts and as thelifestyle choices change to your
point, it's a whole differentballgame.
When it comes to the commercialunits, it's not going to be.
That requires a certainpercentage approval of the
(35:29):
residential owners if there'sgoing to be a different use for
that.
But I want to circle back againon the condo hotel and the
branding.
Do you think people are buyingthem as an investment or as a
lifestyle choice?
Speaker 2 (35:42):
I think it can be both.
I think that some may purchasea hotel condo where they like
the project, they like the brand, they like the location and
they know they want to go therefor a week during the year.
And they think, you know, letme just, I'll just purchase this
unit with the rentaldistribution It'll hopefully
like, pay for itself and allowme to be there for the time
(36:06):
period where I want to be there.
I think that's a certainpercentage of the purchases that
we see.
I think some of the other onesare that they just like the
amenities, especially in thevery high-end projects, that
they like these amenities.
They want to be there on a morefull-time basis and they're
willing to pay for the costsassociated with these type of
(36:29):
projects.
Speaker 1 (36:30):
Have you seen restrictions baked into the
documents that say you cannot gofrom a five-star hotel brand to
a two-star motel brand?
Speaker 2 (36:39):
I mean, are there built in safeguards?
Yeah, those are in there, butyou know just like everything it
has to be enforced.
Good point.
Speaker 1 (36:47):
These condo hotels, Allison, I thought I saw one set
of documents that prohibitedfull time occupancy.
Speaker 2 (36:53):
That is generally a zoning kind of thing, because I
think for you to be in that sortof class there's going to be a
restriction on full-timeoccupancy.
But it also could be that inyour rental management agreement
that you can't be there duringthe peak times of the year.
(37:14):
So it's sort of different butsimilar, and I think that that's
something you'd want to look atand see if you're okay with
those type of terms.
But in my experience it's nevergoing to be at the true hotel
condominiums.
You're not going to be able tostay there full time.
Speaker 1 (37:31):
Let's talk about rental pools, mandatory rental
pools you mentioned.
You know.
The owner buys the unit, maycome down one or two weeks a
year.
The rest of the year.
Owner buys the unit, may comedown one or two weeks a year,
the rest of the year.
I imagine if they want to turnthat asset into an income
producing asset, they'll have torent it out and often they must
do so only through a mandatoryrental pool that's operated.
(37:52):
Is that operated by the condoboard or by the hotel?
Speaker 2 (37:56):
operator.
It can be either in the olderprojects Sometimes the
association controls it, but inthe newer projects it's through
the hotel owner and the flagright.
So I think it can be a reallygood thing.
I think when most or all of theowners participate in the
(38:18):
program and the program, justlike everything, is administered
fairly, there's a fairalgorithm for the rental of
units.
You are, you know, you get adecent distribution.
It can be a really good thing.
You know, we always do hear ofissues where you know
refurbishment that comes up alot, where you're constantly
(38:39):
getting hit for some renovationcost because there's a lot of
traffic.
I mean it takes a lot to have ahigh quality project.
If too many people leave therental program it's not going to
be profitable for the operatorand they might walk away.
And you know what?
In my experience that hasgenerally been a detriment to
(39:01):
the project because it justresults in like a hodgepodge of
guest experiences.
Speaker 1 (39:07):
So if you want to be at a luxury project.
Speaker 2 (39:11):
I think oftentimes to have the one rental program is
going to be in the benefit.
If you're going to be at not aluxury, not a luxury project,
then maybe the you know mom andpop kind of type management and
different managers could workout.
Speaker 1 (39:29):
Well, let's talk about the guest experience.
So it would be possible that Iwant to book a room at the Four
Seasons and it's a condo hotel,right, and I could possibly get
an owned a unit that's owned bysomeone, but do I go to the unit
and it's got their familyphotos all over, so I feel like
I'm in an Airbnb as opposed to ahotel room.
Speaker 2 (39:51):
It may be that way at certain projects.
Again, the luxury projects willhave all the restrictions in
place to prevent that fromoccurring, right that they're
not going to allow that to occurbecause that negatively affects
their brand.
They're not going to let thatoccur.
So you know it's probably notgoing to be at that luxury
resort that you'll see that.
(40:11):
But in other types of projects,like you, you may see that.
You know you may meet agentleman or a woman in the
parking lot to get your keyrather than go to the front desk
, and you know, like youtraditionally would.
So you know it just depends andyou know, if you have a high,
(40:34):
you know, if you have a luxurybrand, they're not going to want
that.
Speaker 1 (40:37):
So what would be your advice to our listeners who are
have thought about a potentialpurchase in a mixed use condo or
a condo hotel?
For them to make an informedpurchase decision.
Allison what's what's?
Speaker 2 (40:50):
some of your best tips.
Well, of course, you want toget your attorney involved like
early on.
Speaker 1 (40:55):
Wait, let me wait, let me stop you right there.
Do you know how I used to doreal estate commercial and
resident as an attorney?
I don't think a lot of peopleactually use attorneys to
purchase property and I'mtalking even units that are one,
12, 20 million dollars.
I mean, I often see when I askwho's your attorney, they're
(41:17):
using a closing agent.
When I ask who's your attorney,they're using a closing agent.
Speaker 2 (41:25):
So the first hurdle is educating people that you
really need to use an attorneywhen you're purchasing real
property.
You're right, and it's not justmaybe it's not the attorney that
you may have used for otherpurchases.
You might have bought a lot ofcondos and a lot of residential
property in Florida or elsewhere, but with these very specific,
complicated properties, havingsomebody with the knowledge of
in-condo law becomes, you know,vastly more important than
(41:48):
understanding some of theseother issues.
And a lot of the attorneys whoare even board certified in
condo law frankly don't dealwith these types of properties.
So you know it's a veryspecialized group of people who
really have the ins and outs tothese types of properties.
So get somebody with thespecialized knowledge that
understands these types ofproperties so you can go in eyes
(42:11):
wide open and understand whatthe obligations are, what you do
and don't have control overyour level of input that you
have or don't have in thecommunity.
You know, as mentioned, likewhat does the you know and
otherwise, what does theproperty look like at night and
just those typical issues, whattype of amenities you have use
(42:35):
of.
Not on some kind of extramembership basis, because, as
you know, a lot of theseprojects have another layer of
membership that you may have toacquire to really receive the
amenities that you thought thatyou were entitled to.
So there's kind of layer uponlayer of complexities here, and
(42:56):
if you're okay with that, thenthese are for you, and they're
not all this highly complicated,but a lot are.
Speaker 1 (43:04):
That's really good advice.
Mixed-use developments do youthink they're growing in
popularity?
Speaker 2 (43:09):
I think they are growing in popularity there's.
You know where we are, at leastin the Southeast Florida right
there's not that much buildableland anymore, so you have to
sort of go up A lot of theredevelopment we're seeing in
terms of projects that areterminated or new projects.
Are these amenity communitiesor like little mini cities
(43:34):
almost right, where people likethat, they desire to have more
access to the stores andbusinesses that they want.
People want the convenience ofit and I think they like being
in these trendy, new, a lot ofthe time very beautiful projects
.
Speaker 1 (43:53):
You know it's funny.
I always used to think of them,as you know, being in more
heavily populated areas, but Iwas recently representing a
large mixed-use community andit's a very rural part of
Central Florida and, like yousaid, it's like a little
self-contained village almost.
Speaker 2 (44:11):
Yes, I think that is what we will see as property is
redeveloped.
I mean developers want tomaximize profits and have the
continuous rent associated withthe commercial aspects of the
property.
I think is probably attractiveas well.
And as to the other side, youknow, people like us want to be
(44:33):
able to access all of theamenities and sort of be part of
the community.
Right, that's probably a factoras well.
Speaker 1 (44:41):
Definitely an appeal.
Well, allison, I really want tothank you for spending time
with me on this episode.
We continue to see more ofthese type of mixed use
developments and condo hotelscrop up, and I think it's really
important for sellers, peoplewho are reselling, people who
are purchasing new constructionto understand what unique
(45:03):
housing options these are.
Speaker 2 (45:05):
Thank you, donna.
Thanks for having me.
I think this is an importanttopic for everyone to hear and
understand, that it's not justone size fits all when it comes
to condo projects out there.
Thanks, allison.
Speaker 1 (45:25):
Thank you for joining us today.
Don't forget to follow and rateus on your favorite podcast
platform, or visitTakeItToTheBoardcom for more
ways to connect.
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