Buying an Apartment in a Mixed Use Building

Buying an Apartment in a Mixed Use Building: <a rel=”nofollow” href=” target=”_blank”>

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Buyers should be careful when buying an apartment in a mixed use building where the commercial units are separately owned because the offering plan can give unfair advantages to the commercial unit owner. Buyers should be especially wary if the commercial units are retained by the sponsor, owned by an affiliate of the sponsor or have been sold to a third party by the sponsor.

Unequal Split for Common Charges

One of the most common tricks played by the original developer is to specify in the original offering plan limits on what common charges the commercial unit will be liable for. For example, the commercial unit might be only responsible for 2% of the building wide electricity charges when it takes up 20% of the space of the building. Is that fair?

Unequal Sharing of Special Assessments

Sponsors can be really sneaky in order to protect the commercial unit from bearing the brunt of any major repairs. They’re able to do this by inserting language into the original offering plan that puts an upper limit on the amount of money that the commercial unit owner is responsible for when it comes to special assessments, such as $10,000 per year.

This can be a real problem if the building needs to levy a major special assessment in order to pay for a new roof or extensive façade repairs.

Separate Utility Meters

One of the dangers of buying an apartment in a mixed use building is that the commercial unit owner may use way more than their fair share of any shared utilities, such as water or gas. For example, what if the commercial unit is leased to an ice cream store that uses a lot of water? If there isn’t a separate water meter for the commercial unit, the residential unit owners might end up subsidizing the commercial unit owner’s extremely high water bill!

Automatic Board Seats for Commercial Unit Owners

Condo offering plans are often written in such a way that the commercial unit owner will always have a board seat. For example, one recent condo conversion building’s offering plan states that “at all times the Commercial Unit Owner may, in addition to voting, designate one person to the Board.”

Furthermore, some condo offering plans will go so far as to allow the commercial unit owner to remain a board member even if they no longer own their unit.

Offering plans can also be written by the sponsor in such a way as to make it virtually impossible for the residential unit owners to band together and remove the commercial unit owner’s board member.

Commercial Unit May Be Used for Any Type of Business

Sponsors can write the offering plan in such a way that the commercial unit owner can essentially lease it to whomever they wish. This means that the business you see operating today may be gone tomorrow, and who knows what type of commercial tenant will be there next.

No Board Approval for Commercial Unit Renovations

An original offering plan can give the commercial unit owner the right to renovate, alter or even subdivide the commercial space without needing approval from the condo or co-op board. Unlike residential owners, the commercial owner might not have to sign an alteration agreement and pay various fees to the building.

Learn more about buying a new development and how you can save $20,000 or more on your purchase with a Hauseit Buyer Closing Credit at

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