Maybe we’ve just been lucky, but I’d rather this setup than a 50-unit one

One of the problems with direct democracy is that it doesn’t scale well, especially if you have a minority veto. What works for a small number of constantly interacting people doesn’t work for larger groups because the flow of information between any two members of the groups breaks down and consequences of pissing off any other particular individual become less and less. There’s a lot of game theory research into this phenomena.

It’s like having a group deciding where to go for lunch. One person can do it easily, three or four takes a few minutes, two dozen takes a committee, and a hundred takes a committee planning weeks in advance and you end up eating in the blandest place possible.

When you start talking about dozens of individual actors, it usually better to create a hierarchy of subunit. Each subunit makes a decision and then sends a representative to a meeting of the same. Repeat as needed for the size of the organization.

Another instance of where the interests of the developer and the early owners will diverge.

Uh, don’t they always diverge? That’s why one wants to sell, and the other to buy.

You’re correct, tho a competent loan officer will question an assessment that just seems ridiculous.

Another instance of where the interests of the developer and the early owners will diverge.

That reduces the income required to qualify for the loan based on the housing costs required.

The fee (it’s called here “maintenance fee”, as I understand; ‘assessment fee” is for unplanned, bigger expenses – like new set of entry doors, f.ex, or new equipment for a janitors/porter’s closet) of $200 per month sounds about right – but I imagine it’d only work if there are 200+ owners to share the pain.

The developer still owns those unsold units and has to fork over. Of course, he controls the Association until over half are sold, so he may want to defer any expenses he can until he figures he can sell his units.

I was treasurer and/or president of a 9-unit condo in Hyde Park for about 10 years, most of the 1990s.

the downside to a reserve fund isn’t as bad as suggested… it’s forced saving but your unit’s proportionate share is, in fact, your unit’s and if you sell it has value. the alternative is that the individual owners have to keep their own savings up or otherwise be prepared to deal with a big special assessmant that can come up without warning.

Yes, it’s possible to go too far, but the only condos I ever heard of that tried to go naked either came to regret it or everyone was so well-off they could write a $5K check on a week’s notice and hardly feel it. The reserve fund avoids the situation where some pay and some don’t, and you’re establishing credit and penalties and hounding people, which can become incredibly bitter when you’re all living in the same building.

I should have linked to the followup article: the lender itself bought the property at the foreclosure auction, paying $7 million to become the owner of what it had already loaned $46 million to build.

The dynamics of a small building like this one (4 units) are VERY different than the dynamics of a large building like you guys are talking about. I had a miserable experience in a 5 unit building.

For one thing, the instances where a small building like this has TOO much in the way of reserves is likely zero. There always is some cheap person among the units who doesn’t want to pay hardly anything and they just keep complaining until everyone gives up. Buildings this size constantly move from doing everything themselves to getting (semi) professional help. Frankly I think that condos of less than 10-15 units are an abysmal idea because of the small group dynamics. Someone ought to write a paper on that.

As far as the big units, it is WAY different. They always have “professional” management, even if it is ineffective. And they generally play by some set of rules, even if unevenly enforced. I live in a big building now and even though my assessments are literally 5x higher a month I am WAY happier because I don’t have to do everything myself.

As far as these buildings being half occupied, that is something I know nothing about, but it must be grim. I will let the sun belt people speak on that, although I am sure it is happening more and more here in Chicago.

However, given the circumstances the single entity LLC that owns the building for the developer is likely to be effectively broke. Watch out for skimping on major maintenance issues being ignored or treated cheaply.

Block investor sales and auctions have been, so far rare, partially because banks have been reluctant to mark down to true value their dumb loan. In this situation I wouldn’t be surprised if the bank allowed the developer to rent the remaining units while giving a loan extension (i.e. kicking the loan due date down the road).

This last scenario is what happened at “The Roosevelt Collection” in Chicago. That building couldn’t close any units because once the time to close arrived, none of the contracts could appraise to the purchase price (among those actually sold).

The market solution for this kind of situation is for investors to buy blocks of units. This has happened in my area (I don’t know if it’s happened with foreclosed buildings). Of course such investors probably have to pay cash.

Given the difficult residential market currently, those remaining 152 units are likely to remain empty for quite a while. In a mostly-vacant condo, what kind of fees are those few pioneering purchasers looking at?

One quibble is that a reserve fund isn't necessarily a good thing. It amounts to forced saving, and for financially responsible people during good economic times that's often not a good use of money. OTOH, the alternative may be that the association spends a lot of time and money collecting special assessments from deadbeats and people who underestimated their ownership costs.