What to know before buying an apartment in a New York City condo-hotel
Living like Eloise in The Plaza Hotel sure sounds fun, but there are some risks you need to be aware of before buying.
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I’m looking to buy an apartment in a building that offers hotel-like amenities and service. I think a condo-hotel hybrid might be exactly what I’m looking for, but I heard there can be some downsides. What exactly are my risks?
Buying in a condo-hotel like the Plaza or Baccarat—or in a more rare co-op hotel like the Pierre—certainly has benefits. You can live in a prestigious address and take advantage of five-star amenities such as turn-down service, housekeeping, spas, and, sometimes, an entrance and lobby separate from the hotel portion.
While those may be big draws if you are willing to pay for the privilege of having those conveniences, buying one of these apartments can be a tricky real estate transaction because there’s no uniform way these buildings are operated, says Jeffrey Rendin, a New York City real estate lawyer and partner at the firm Wagner, Berkow & Brandt.
First off, residential owners have very little say over what happens in the hotel part of the building.
“It’s something that has to be investigated quite thoroughly, and one has to look very closely at the operations of the building as it’s entirely building-by-building,” Rendin says. “The offering plan or Declaration of Condominium is where you turn, and you need an astute lawyer to be alert to this.”
Residential-hotel hybrids tend to have certain restrictions, “and the fine text is really something that needs to be read even more than any other purchase you would make of an apartment in New York City,” Rendin adds.
For example, the Pierre, which has nearly 200 hotel rooms and 77 co-op apartments at a very tony Fifth Avenue address, allows cash purchases only, no financing, and as with most co-ops, has a very strict board.
When Trump Soho, now named The Dominick, first opened about a decade ago, condo owners could only live in the apartments for a certain number of days a year due to the area’s zoning laws. For the rest of the year, their units were managed by the hotel and rented out as hotel rooms to other people.
Will you mingle with hotel guests?
Other residential-hotel hybrids may not have many restrictions or even perks like a separate entrance or elevator bank, so you might share a lobby and elevator with hotel guests. In that case, residential floors, which are usually on the floors above the hotel component, often require special access to reach, such as a key card. If the elevator is shared in your potential new building, this is definitely something you’ll want to double check.
As with buying an apartment in any mixed-use building in NYC, if you’re lured by the hotel brand name, you need to be aware that it could change down the line, which is a common occurrence in NYC. The prestigious Plaza, for example, has had numerous owners since it opened in 1907.
“It is atypical to see something going from Starwood to a Motel 6 because a building is built in a certain area and has a certain property value, etc, but it could become something less prestigious,” Rendin warns. “If you’re not going to read the fine print, you’re not going to understand what could change.”
Also bear in mind that if you’re planning (and allowed) to take a mortgage out (or might eventually sell to someone who needs one), banks may be wary about lending due to the possibility of a hotel going out of business or changing ownership.
Who controls the building—and what are they responsible for?
Just as you should when considering buying a regular condo or co-op in NYC, you need to look into the details of how the building will be operated according to its offering plan or condo declaration.
For instance, if there’s just one lobby in which hotel guests and residents pass through and are served by the same building staff, what happens when the lobby or elevators need remodeling or upkeep to stay competitive with other luxury buildings and hotels in the area? Are you partially responsible as a unit owner, and at what percentage?
“That’s when things can get tricky, and it’s something you should be aware of, and find out,” Rendin says, adding that building operators typically tend to allocate those shared expenses by percentages. “Owners who use the apartment just a few times a year might object to a substantial percentage fee for the remodeling costs of a lobby they visit occasionally.”
Wagner, Berkow & Brandt, LLP is a NYC-based law firm concentrating in real estate, corporate, commercial litigation, and cooperative and condominium law. Founding members Steve Wagner and Bonnie Berkow have been recognized for their real estate expertise for more than 30 years. To submit a question for this column, click here. To ask about a legal consultation, send an email or call (646) 780-7272.
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