Take It To The Board with Donna DiMaggio Berger
Take It To The Board with Donna DiMaggio Berger
A Primer on Mixed-Use Communities and Condo Hotels with Becker Attorney Allison Hertz
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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Hi everyone, I'm attorney Donna DiMaggio-Berger and this is Take it to the Board where we speak condo and HOA. Today, we're going to be talking about two types of housing options which require serious deliberation on the part of potential purchasers mixed-use communities and condo hotels. Living in a mixed-use condominium, where residential units share space with commercial businesses like retail shops, restaurants or offices, offers both benefits and challenges. Choosing to live in a mixed-use community requires careful consideration of noise, commercial activity and governance structure. Before buying, prospective residents should review the condominium documents, understand any restrictions and assess how the commercial components will impact daily life. Now, condo hotels can be a great option for buyers seeking a vacation property with rental potential, but they also require careful consideration of costs, restrictions and long-term investment value. Anyone considering a condo hotel in Florida should review the management agreement, the rental program terms and financial obligations before committing.
Speaker 1:Some common questions about both of these housing options include how do boards balance the competing interest of homeowners and business owners? Are condo hotels a good investment, and who really controls the decision making in these unique properties? To help us answer these questions, I'm joined today by my colleague, allison Hertz, a seasoned community association attorney who has served in various key roles with the Florida Bar, including as the co-chair of the Condominium and Plan Development Law Committee of the Real Property Probate and Trust Section of the Florida Bar. That's a real mouthful Allison. Allison, welcome to Take it to the Board.
Speaker 2:Thank you, good to be here.
Speaker 1:So let's start with the basics, because not everybody may be familiar with these housing options and they may not even have taken hold, you know, everywhere in the US. So what defines a mixed-use community and how does it differ from a traditional condo or HOA?
Speaker 2:There are so many places that we go today that are mixed use that people probably don't even realize it's the old don't judge a book by its cover type thing that you know downtown buildings, hotels, highly amenitized community shopping centers, residential components generally under the umbrella of certain restrictive covenants governing the whole project. In Florida we have the traditional mixed-use condominium and that's sort of becoming more rare where a condominium association governs the project. Now it's more typical to have those separated, where there may be a condominium within a building and the typical common elements or shared space is operated by a separate business owner and there's this shared facility concept that we have now here in Florida.
Speaker 1:Florida. I want to talk about both, but let's start with the traditional mixed-use condo where you've got a volunteer condominium board of directors and they're overseeing a residential. Let's say it's a seven-story building, there's 80 units and then on the ground floor there's seven commercial units. Now I have driven by those type of communities and thought, wow, that would be so convenient to have a Whole Foods in my building. I could just pop down, have a spa service next door, you can get your nails done. It seems like it's such a great lifestyle. However, you and I know as community association attorneys that appearances can be deceiving and that there's a lot of things going on behind the scenes, a lot of tensions at times between the commercial usage and the residential. So for those traditional, where you've got that volunteer board, how do they?
Speaker 2:navigate that Well. I think many coexist in harmony and the board does a good job of managing both sides and making sure the interests are protected and preserved both sides and making sure the interests are protected and preserved. There's always like that natural tension between the sides and the traditional setup here. Boards need to understand and have like a shared vision between both sides of the project here, because the success of one side of the project commercial is definitely going to, you know, rely on the success of the residential and vice versa here. So boards need to be realistic that the commercial owner needs to make money. These commercial businesses need to make money and a profit in order to be successful. However, the commercial owners should not be able to do that to the detriment of the residential 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 fairly balance both sides of the project so they can coexist. We do see that. You know there are problems as well.
Speaker 1:In the mixed-use condos I've represented. I don't think I've had any commercial unit owners on the board, which is unusual to me because they do have a very vested interest in how the association is run. Have you had commercial unit owners on the boards in your mixed-use condos?
Speaker 2:I have, but I do. I agree that it's rare that they're so focused on running their business and most of the time the residential owners do a good job with the management and administration that they don't really feel like they need to get that highly involved when the commercial units are not so great in number.
Speaker 1:We have a statute in Florida, 718-404. It's very brief, statutory provision, not lengthy, but it does talk about a few things. Can you tell us about that?
Speaker 2:Their statute exists regarding mixed-use condominiums, and the bulk of it was from the mid-90s, where the statute now protects residential owners in a way, by stating that the commercial owner cannot veto amendments to the condominium documents and they cannot control the board if there are more residential units than commercial units. So it was put in place to protect owners from the monopolization of the board by commercial owners, which in a traditional mixed-use project we really don't see that much anyway.
Speaker 1:That statute was intended to have retroactive application correct.
Speaker 2:It was intended to have retroactive application but we know that the court deemed it not to apply. It materially altered voting rights and vested rights so it was not deemed to be retroactive, although it attempted to be retroactive, which we see a lot in the Florida law.
Speaker 1: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 residential owner, I have leasing restrictions. I have to get my tenants approved right. I have to do certain things, like you know provide a security, a common area security deposit. It's, you know, a 30-day approval process, sometimes even lengthier, and my commercial unit owner next door or down below doesn't have to do these things. The same thing with alterations. So in a lot of these and I think it's in older documents but there's an exemption for the commercial owners when it comes to exterior alterations, signage, even landscaping. I did have one client that had a very lengthy battle regarding landscaping that the commercial owner put in place that did not at all blend in with the rest of the community's landscaping. Do the Florida statutes provide any cover in that case?
Speaker 2:Not necessarily. I would say that's a document issue right, what the condominium documents have concerning all of these restrictions. And realistically, you need to be able to entice tenants as a commercial owner a lot of the time and they need to be able to operate and make residential owners. I mean, I do hear from colleagues that represent these type of parties that they need certain flexibility in place to maximize their occupancy in the condominium. So they do, I suppose, get a certain level of special treatment built into the documents and kind of is one of those. It is what it is type things. Yes, there can be constraints to what they do, but oftentimes they do get this special treatment and frankly, I think the residential owners buy in these types of projects because of the commercial amenities that might be available there. So they, you know, while they could change over time, they do like these amenities and they're there because they want access to these commercial amenities and different stores, restaurants, you know you mentioned salons and med spas and all kinds of things.
Speaker 1:Yeah, I think you're right, but I think a lot of people may not dig deeper. So, you know, we've had a couple of recent guests, we had the former ombudsman, we had an anonymous owner in a luxury building and a lot of times we find that potential purchasers they're really focusing on a few things. They're focusing on the lifestyle experience. Wow, wouldn't it be great to just I'm cooking, I ran out of something. Oh, there's a Whole Foods down at the bottom of this building. Just go pop in. Or you know, whatever I nail we said hair, whatever it is workout, Pilates but are they digging deeper in terms of the restrictions on those commercial units, noise, the length of hours of operation for some of those businesses? Yeah, restaurants, great, but let's talk about that. How many potential purchasers, Allison, do you think, who live in that mixed use building and they may love the restaurant below, but have they considered what potential noise issues may arise?
Speaker 2:And parking right. That's a huge one. Parking issues come up all the time. All of those issues are important to go in with your eyes wide open as to what this really is. Is there valet requirements? What am I paying in terms of parking? How many vehicles can I have Access issues? Do I get to enter the building through the point of entry that I think I get to enter through, or is that only for hotel guests? So noises, smells, you know what, if there's a nightclub at the top floor of the building and there's, you know, after hours, noise, see, when you visit the building at 12 noon are perhaps not the same as when you go at 10 pm, when it starts the hustle and bustle of, like, the nightlife, particularly in our urban city areas.
Speaker 1:The change also you know, the seven commercial businesses you see operating when you purchase may not be the same seven businesses. A decade from now. There could potentially be a 7-Eleven open 24 hours selling lottery tickets and beer, and you never intended that for your building. Is there any way to protect yourself from those kinds of changes?
Speaker 2:I mean you would hope that the type of use would be set forth in the controlling documents 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 smell sandwiches being made all day when I enter into the building, and some of them do address these use restrictions. Some of the older ones really don't. So I think that's something important to look at, and obviously they change over time. I mean, the developers do a really good job of writing these documents and trying to predict the future in terms of how things could change at the project, but you just can't anticipate every single thing that may happen. You know, 20 years later.
Speaker 1:So in some of our golf course communities I live on a golf course community and this has been driven home it's a symbiotic relationship. So if you've got a healthy country club, let's say it's a private club. The club facilities are not common areas for the homeowners association. But you want a vibrant club because again, symbiotic relationship. You want a vibrant club because, again, symbiotic relationship. Is it similar in mixed use? I mean, if you came to the building and you had six of the seven commercial units vacant, empty, what kind of impact does that have on the building?
Speaker 2:Yeah, no one wants to see empty space. It's just a bad look, right? It just appears that something is wrong when it may not be. It might be in a transition, but it also may cause the commercial owner to struggle in terms of paying for their obligations. That is not something that the other owners want to see and they don't want to have to pick up the cost. It also, you know the change in occupancy. This continuous change is not helpful. The units have to be built out. There's construction, there's noise. It's a nuisance to the adjacent owners. So having some level of occupancy is good. The 7-Eleven or the subway, you know, might not be what you want to see. I'm not sure. I think I might rather have a vacant space. It just depends. You know, being a lawyer, it depends, right, it's a bad look.
Speaker 1:So I've sort of been referencing the commercial spaces as being at the street level, which is typical for some of the traditional mixed-use condos, but that's not always the case, right? So sometimes the offices are on higher floors in a multifamily building. I got to imagine there's a whole different set of challenges with that when you've got the general public traversing the elevators and walkways to get to the commercial space that's located not at street level but, let's say, on floor five or six.
Speaker 2:There are so many different ways that the developers slice and dice the property now and even the airspace right, and there's no one way to do it, and it's become very creative in terms of how they deal with this. They've evolved over time. You could have the office at the bottom and then a hotel lobby, and then a residential condominium on top and then a hotel at the very top level. But you're right, all of the access and easement rights have to be very carefully planned out and work with engineers in the process of this, because one of the difficulties with these projects is allocating the expenses related to all of these different components and making sure that you are able to allocate them according to what you've set forth in the restrictive covenants, meaning that your covenants actually mesh or jive with what you set up on the ground and the access rights and the utilities, so it becomes very complicated.
Speaker 1:What's the biggest complaint you hear about the allocation being unfair?
Speaker 2:The biggest complaints I've heard over the years about the allocation is that it's duplicative per se, that residential owners or the minority owners believe that they're paying for certain things twice, three times, because there are so many levels of expenses or they have to pay for property that they don't use. Right, why am I paying for the electric that serves the restaurant? And if they don't set this up on the ground properly, meaning that there's not a separate meter or a sub meter or that somebody is reading the sub meter or properly logging the sub meter charges, that these things don't get allocated properly. So it's a very complicated accounting.
Speaker 1:How easy or difficult would it be to make an argument that the inherent setup was unconscionable from inception?
Speaker 2:I know those arguments have been made and a lot of folks just don't like this type of concept where the traditional association doesn't control certain portions of a building that have been traditionally administered by that association. But I think it can work. I think, just like a lot of things in life, if both parties play fair, it works. If you know what you're getting into, that's helpful, that you don't misconstrue the situation. If you know what you're getting into. That's a huge part of that issue.
Speaker 1:There are certain laws that apply to purely residential condos and a whole different set of laws that get dragged in when we're talking about condo hotels and mixed-use condos. What are a few of the laws that wouldn't typically apply to a traditional residential condo, purely residential condo that will apply in a mixed-use or condo hotel?
Speaker 2:Well, one of the bigger ones that comes to mind is that our traditional associations deal with the fair housing laws right and in a commercial setting. You're not dealing with that. You're dealing with the ADA, the Americans with Disability Act, and they both have different standards and while they're similar, they are different. I mean in terms of Florida real estate. Here, if you're buying into a hotel condominium, for example, it's a commercial property. A lot of the time You're not going to get your homestead exemption. There's a different tax structure, so there's a host of tax-related issues. I, I would presume, dealing with that type of property. You're dealing with different level of maintenance requirements, so it's a different animal.
Speaker 1:What about OSHA for restaurant workers in the condo hotel?
Speaker 2: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 think that having the business owner managing some of this, they're more set up to deal with a lot of these complicated properties.
Speaker 1:I agree, but does the business owner, because sometimes the natural inclination is to kind of push the potential liability off on someone else, right? I think that's possibly just human nature in some of these setups. Have you seen any of these condo hotels or mixed use property more the condo hotel where the condo board really has little say over the administration or management or oversight of the amenities and yet they're still responsible, potentially legally, if something goes wrong?
Speaker 2:I mean that always could occur. If something goes wrong on the condominium property, yeah, on the condominium property, yeah. If you have condominium property that you have no say in what's going on and then you're responsible at the end of the day, that's a problem. Hopefully there are different agreements out there that would control that situation and provide for some level of indemnification or defense for a lawsuit, but I don't know.
Speaker 1:You know, in some of these newer construction I mean, we're seeing cranes everywhere, which is a good sign. In South Florida and Central Florida, in other states as well, you're seeing a lot of construction. Again, in a lot of cases there's a public component to this. So I know in Miami there's a pedestrian walkway around a lot of the luxury high-rises and the condos that are being constructed. Their owners, the association, is responsible to maintain that pedestrian walkway, even though it's open to the public. I mean, I'm thinking just off the top of my head, the insurance that you have to make sure you put in place to cover that.
Speaker 2:Yeah, we see those situations as well, where you have the street, where it has public meters right there but the condo association is responsible for the sidewalk and you know dealing with slip and falls that occur and that does happen. I mean sometimes you can shift the responsibility to some kind of CDD. You know community development district in the area, but oftentimes it falls on the association and you know you can say that's not fair. But going back to one of my prior points, you want to live in that type of a, I would say community right and a lot of times that is how they are developed and do the benefits of being there sort of outweigh those other issues.
Speaker 1:Listen, that lifestyle comes with its own set of challenges and costs, so I agree with you. I'm not sure how many people really dig into those details, though.
Speaker 2:And sometimes they're not discovered until a problem happens. Right, I mean, you know, even if which, obviously you want to have a lawyer involved in these more complicated type of purchases and these new mixed use and particularly hotel condominium developments. But you know, every issue cannot be expected or prevented, for that matter. I mean, once we know about it, we always try. There's, you know, different risk management tools that you can use, but it's there.
Speaker 1:So, given the highly amenitized communities we're talking about, how do reserves work?
Speaker 2:In some of the older traditional mixed-use condominiums the reserves are sort of typical that you reserve for you know the portions of the condo that you're required to under the statute and now we have a level of mandatory reserves. But where you have a building where, for example, the roof is part of what I said is the shared facility, it's not part of the condominium, it's owned by some separate commercial owner. There is no requirement for the condo or a unit owner to reserve for that portion of the property or even maybe the complete shell of the building right, because you're just really own airspace. So there is no reserve requirement under Florida law. There's certainly no mandatory requirement under Florida law. There may be an option that the commercial owner has to collect reserves through their restrictive covenants, but a lot of them don't do that. So you know, you don't know when you're going to be hit with the increased assessment for the infrastructure in a lot of these places and as a buyer you certainly don't have the level of disclosure that you would in a traditional condominium.
Speaker 1:That's troubling. So the fact that we're seeing more of these types of communities and we've seen the emphasis in Florida upon fiscal responsibility for shared ownership communities, particularly multifamily buildings Do you think the legislature, in Florida at least, is going to get around to requiring separate business entities who manage condo hotels, for example, to set up reserves? So there is some continuity in the budget, so people know pretty much what the expenditures are going to be over the lifespan of certain components.
Speaker 2:I would doubt it. I just don't think that's happening. From what I hear from those in the industry is that you know they're professionals, they are in the business of managing commercial projects. They have to comply with lender requirements a lot of the time that need certain inspections or certain levels of maintenance, and that's not necessary for a commercial property owner to you know, have the state meddling in their business operation at that type of level. So you know I'm not saying that's really my opinion, but that's what those in the industry I've heard from in terms of why they don't need to reserve. I mean there's no reserve requirement in Florida for commercial, purely commercial condos. If you have an office, a medical condo, the mandatory reserve laws don't apply. So they kind of take the same approach there. I'm not sure, from what I've seen, of the management of those projects. It's really best case. But that was the rationale that I've heard.
Speaker 1: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 trust them to be fiscally responsible and stay on top of maintenance. To be fiscally responsible and stay on top of maintenance, Look for anybody who's been to more than one hotel in their life. They know that some are better maintained, cleaner, nicer, fresher than others. So I guess, Alison, we'll have to see if the legislature changes its mind about that.
Speaker 2:And this is particular with respect to reserve requirements, is fine about that. Yeah, and this is particular with respect to reserve requirements. I mean, there are the other requirements for building safety inspections that do cross over a lot of the time to these type of structures that we're talking about. So they may get inspections for structural problems, but for the reserve aspect of it there is no requirement.
Speaker 1:Of course reserve aspect of it. There is no requirement. Of course developers council could bake these requirements into the governing documents.
Speaker 2:Well, a lot of times they have the option of collecting the reserves, but I'm not so sure a lot of them do, or what they're really based on. They're not tied to a certain system like we are for our traditional condos, based on estimated remaining useful life and how we deal with that typically.
Speaker 1: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 newer mixed use communities, which is a condo inside a shared facility parking, elevators, utilities. What are some of the challenges?
Speaker 2:The challenges really include making sure that you can actually administer the allocation based on what is there. I mean the documents are black and white. They say that you owe 30% of the shared facility expenses, but actually being able to tie that to what's on the ground often becomes very difficult, as I mentioned, you know, in terms of utilities, particularly trying to deal with you know what meter is tied to what part of the property. A lot of the times even personnel costs are debatable how much time a certain individual is serving X part of the property versus Y part of the property. So it's very difficult to sort of administer the allocation.
Speaker 2:A lot of the times also, the commercial operator isn't that great at giving the association the budget. What's the budget going to be for next year? So the association's trying to plan for 2025 or 2026, and they finally get it several months into the year. So it is very difficult for the association and then trickles down to the owners to be able to plan because the communication sometimes isn't there. Sometimes it is, of course, dealing with you know, being attorneys, we're a lot of the time dealing with the more difficult cases. But that's what I've seen is that the communication sometimes is not as seamless as it should be.
Speaker 1:Assuming that all the amenities Allison are really placed in a shared component, a shared unit component. What is the board's budget? The association's budget should be relatively low at that point. What are they really overseeing?
Speaker 2: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 the shared facilities aspect of the budget. It drives the cost.
Speaker 1:You know, I said in the intro, one of the questions we get a lot is who's really making the decisions? So let's say it's a condo hotel and the residents feel strongly that there are some security breaches with hotel guests. They don't have as tight a handle as they should have in terms of who's entering the building, who's using the spa and the gym and everything else. What would be the typical channel for the board in a condo hotel where they're hearing from the members the association members that there are serious security concerns? What if the flag operator disagrees?
Speaker 2:Well, you're going to go to the manager, right, and try to talk about the concerns and you may or may not get somewhere. At that point you'll perhaps have to go to the next level of really looking at these documents to see what can and cannot be enforced. There's no statute that governs this, so you're really in a document type issue where you might have to enforce. If they provide that a certain level of security was promised, you're off to enforcement. If they provide that a certain rating of the property should be kept, you're off to enforcement. If they provide that this is a luxury property and these problems are causing it to be much less luxurious than you would have expected, you know you're off to enforcement, which is not best case scenario. It's expensive, right, and oftentimes you know that you're the little guy and it's an uphill battle unless you have an army behind you of other people who are like-minded and want to help fund this.
Speaker 1:There's been talk over the years Allison about creating a separate condo hotel statute.
Speaker 2:Is that still in the works or I don't know if there's necessarily been talk about a condo hotel statute, but I suppose the framework for that was imposed last year, in 2024, when we had the adoption of this condominium within a building statute in Florida, which sort of legitimized this concept of minimal common elements and things that were traditionally common elements now being what's known as shared facilities administered and operated by this other third party, where the owners really have very, very little control of what's going on. The hotel aspect adds another layer in terms of rental agreements and other certain you know, administrative issues, but that's like a twist on what's already now in the statute.
Speaker 1:You know that just piqued my interest on something else and you know we are seeing a lot more condo terminations in Florida as older multifamily buildings in fairly desirable locations are starting to make the decision that maybe they don't want to continue. Maybe the building is nearing its lifespan without having to pump significant money into improvements and repairs in a condo hotel setting. These things are going to get old over time. Let's fast forward two, three, four decades. Who gets to make the decision in a condo hotel to terminate and sell the building?
Speaker 2:The condo owners would still make the decision, but I would presume that the document would also provide for some level of commercial owner, shared facility owner. You know, super approval over this right. You can't just fracture the entire project, so I think that's probably where it would lie.
Speaker 1:We'll see, because you know again, this is a great new concept now I know it's been around for a while, but these projects will age and with that age will come new challenges. I did want to talk to you about the branding for the lifestyle right. So people want we're seeing this whether it's a luxury automobile brand that's throwing up buildings or it's being associated with a luxury, upscale hotel flag. How important is the branding to these types of projects?
Speaker 2:in the hotel projects. I think this is what generally gets people in the door right, that they want to be part of this luxury brand generally gets people in the door right that they want to be part of this luxury brand. They want to be part of this trend. People always want to be in what's hot and trendy, right? So I think it's extremely important in the hotel condo side. But we do see projects that start with one brand transform into some other brand at a later time, right into some other brand at a later time, right? I think that as long as you stick with the sort of same level of you know, four diamonds, five stars, generally it's going to be allowed under the restrictive covenants that I've seen, but I think it's definitely important.
Speaker 2:Going back to one of the points you made, those who buy into these communities, hotel condos, just regular mixed use projects obviously need to understand that. You know you can't keep a commercial business there forever. So you said I want to be in this project because there's a Whole Foods. I mean, whole Foods is doing really pretty well, I think, right now, but there could be a point where it's turned into a bowling alley, right. So you have to roll with it.
Speaker 1:I guess I would say Well, and unlike a traditional condo where we've got material alteration provisions, where right now we're seeing people convert tennis courts into pickleball courts and as the lifestyle choices change to your point, it's a whole different ballgame. When it comes to the commercial units, it's not going to be. That requires a certain percentage approval of the residential owners if there's going to be a different use for that. But I want to circle back again on the condo hotel and the branding. Do you think people are buying them as an investment or as a lifestyle choice?
Speaker 2:I think it can be both. I think that some may purchase a hotel condo where they like the project, they like the brand, they like the location and they know they want to go there for a week during the year. And they think, you know, let me just, I'll just purchase this unit with the rental distribution It'll hopefully like, pay for itself and allow me to be there for the time period where I want to be there. I think that's a certain percentage of the purchases that we see. I think some of the other ones are that they just like the amenities, especially in the very high-end projects, that they like these amenities. They want to be there on a more full-time basis and they're willing to pay for the costs associated with these type of projects.
Speaker 1:Have you seen restrictions baked into the documents that say you cannot go from a five-star hotel brand to a two-star motel brand?
Speaker 2:I mean, are there built in safeguards? Yeah, those are in there, but you know just like everything it has to be enforced. Good point.
Speaker 1:These condo hotels, Allison, I thought I saw one set of documents that prohibited full time occupancy.
Speaker 2:That is generally a zoning kind of thing, because I think for you to be in that sort of class there's going to be a restriction on full-time occupancy. But it also could be that in your rental management agreement that you can't be there during the peak times of the year. So it's sort of different but similar, and I think that that's something you'd want to look at and see if you're okay with those type of terms. But in my experience it's never going to be at the true hotel condominiums. You're not going to be able to stay there full time.
Speaker 1:Let's talk about rental pools, mandatory rental pools you mentioned. You know. The owner buys the unit, may come down one or two weeks a year. The rest of the year. Owner buys the unit, may come down one or two weeks a year, the rest of the year. I imagine if they want to turn that asset into an income producing asset, they'll have to rent it out and often they must do so only through a mandatory rental pool that's operated. Is that operated by the condo board or by the hotel?
Speaker 2:operator. It can be either in the older projects Sometimes the association controls it, but in the newer projects it's through the hotel owner and the flag right. So I think it can be a really good thing. I think when most or all of the owners participate in the program and the program, just like everything, is administered fairly, there's a fair algorithm for the rental of units. You are, you know, you get a decent distribution. It can be a really good thing. You know, we always do hear of issues where you know refurbishment that comes up a lot, where you're constantly getting hit for some renovation cost because there's a lot of traffic. I mean it takes a lot to have a high quality project. If too many people leave the rental program it's not going to be profitable for the operator and they might walk away. And you know what? In my experience that has generally been a detriment to the project because it just results in like a hodgepodge of guest experiences.
Speaker 1:So if you want to be at a luxury project.
Speaker 2:I think oftentimes to have the one rental program is going to be in the benefit. If you're going to be at not a luxury, not a luxury project, then maybe the you know mom and pop kind of type management and different managers could work out.
Speaker 1:Well, let's talk about the guest experience. So it would be possible that I want 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 by someone, but do I go to the unit and it's got their family photos all over, so I feel like I'm in an Airbnb as opposed to a hotel room.
Speaker 2:It may be that way at certain projects. Again, the luxury projects will have all the restrictions in place to prevent that from occurring, right that they're not going to allow that to occur because that negatively affects their brand. They're not going to let that occur. So you know it's probably not going to be at that luxury resort that you'll see that. But in other types of projects, like you, you may see that. You know you may meet a gentleman or a woman in the parking lot to get your key rather than go to the front desk, and you know, like you traditionally would.
Speaker 2:So you know it just depends and you know, if you have a high, you know, if you have a luxury brand, they're not going to want that.
Speaker 1:So what would be your advice to our listeners who are have thought about a potential purchase in a mixed use condo or a condo hotel? For them to make an informed purchase decision. Allison what's what's?
Speaker 2:some of your best tips. Well, of course, you want to get your attorney involved like early on.
Speaker 1:Wait, let me wait, let me stop you right there. Do you know how I used to do real estate commercial and resident as an attorney? I don't think a lot of people actually use attorneys to purchase property and I'm talking even units that are one, 12, 20 million dollars. I mean, I often see when I ask who's your attorney, they're using a closing agent. When I ask who's your attorney, they're using a closing agent.
Speaker 2:So the first hurdle is educating people that you really need to use an attorney when you're purchasing real property.
Speaker 2:You're right, and it's not just maybe it's not the attorney that you may have used for other purchases.
Speaker 2:You might have bought a lot of condos and a lot of residential property in Florida or elsewhere, but with these very specific, complicated properties, having somebody with the knowledge of in-condo law becomes, you know, vastly more important than understanding some of these other issues.
Speaker 2:And a lot of the attorneys who are even board certified in condo law frankly don't deal with these types of properties. So you know it's a very specialized group of people who really have the ins and outs to these types of properties. So get somebody with the specialized knowledge that understands these types of properties so you can go in eyes wide open and understand what the obligations are, what you do and don't have control over your level of input that you have or don't have in the community. You know, as mentioned, like what does the you know and otherwise, what does the property look like at night and just those typical issues, what type of amenities you have use of. Not on some kind of extra membership basis, because, as you know, a lot of these projects have another layer of membership that you may have to acquire to really receive the amenities that you thought that you were entitled to. So there's kind of layer upon layer of complexities here, and if you're okay with that, then these are for you, and they're not all this highly complicated, but a lot are.
Speaker 1:That's really good advice. Mixed-use developments do you think they're growing in popularity?
Speaker 2:I think they are growing in popularity there's. You know where we are, at least in the Southeast Florida right there's not that much buildable land anymore, so you have to sort of go up A lot of the redevelopment we're seeing in terms of projects that are terminated or new projects. Are these amenity communities or like little mini cities almost right, where people like that, they desire to have more access to the stores and businesses that they want. People want the convenience of it and I think they like being in these trendy, new, a lot of the time very beautiful projects.
Speaker 1:You know it's funny. I always used to think of them, as you know, being in more heavily populated areas, but I was recently representing a large mixed-use community and it's a very rural part of Central Florida and, like you said, it's like a little self-contained village almost.
Speaker 2:Yes, I think that is what we will see as property is redeveloped. I mean developers want to maximize profits and have the continuous rent associated with the commercial aspects of the property. I think is probably attractive as well. And as to the other side, you know, people like us want to be able to access all of the amenities and sort of be part of the community. Right, that's probably a factor as well.
Speaker 1:Definitely an appeal. Well, allison, I really want to thank you for spending time with me on this episode. We continue to see more of these type of mixed use developments and condo hotels crop up, and I think it's really important for sellers, people who are reselling, people who are purchasing new construction to understand what unique housing options these are.
Speaker 2:Thank you, donna. Thanks for having me. I think this is an important topic for everyone to hear and understand, that it's not just one size fits all when it comes to condo projects out there. Thanks, allison.
Speaker 1:Thank you for joining us today. Don't forget to follow and rate us on your favorite podcast platform, or visit TakeItToTheBoardcom for more ways to connect.