Risks of buying in small-unit development?

For simplicity- let's say you buy an apartment in a building with 10 apartments. If it's new construction- figure it's likely built poorly. You go back to the sponsor to demand that he/she fix all the problems- after all, it's a new building, you shouldn't have a leaky roof, or an elevator that is creaking, etc. The sponsor refuses to pay. You are supposed to have legal protections- but the Attorney General's office is doing a piss poor job at protecting people from crappy construction. This leaves you with limited options- sue, fix it yourselves, or a combo of suing and fixing it yourselves. Now you have to come up with funds to do this (and your common charges might fund a reserve- but it wasn't intended to have an expense this large so soon)- it's a small building- which means each apartment is sharing the costs to the tune of roughly 10% each. If you had 100 units in your building, it would cost roughly 1% each. The larger building might have higher costs- but not necessarily in proportion to their size difference.

Also what about serving on the condo board? In a large building, chances are there will be people that actually want to serve on the board. In a smaller building there is a higher likelihood that people will serve out of necessity rather than because they want to volunteer.

I am not saying don't buy a small new condo- just go into it eyes wide open.

thanks for your reply.

when you figure that a new construction is likely poorly built, do you mean just hypothetically for your example scenario, or because new construction is generally poorly built?

i understand about future repair cots being split by fewer people. are there any other instances where smaller buildings are riskier?

about condo boards, one development i'm interested in is only 5 units. in that case wouldn't the condo board pretty much be the entire building?

i saw in another post of yours that you yourself live in a small-ish condo development. what has been your experience in terms of unwelcome surprises?

There is something going on with this thread (as well as some others earlier today)- I can see it on my RSS feed, but not on the talk page. Which might explain why you are not getting more responses.

In any case, I meant both hypothetically and from my own experience that most of the new construction is poorly built.

In terms of unwelcome surprises, we have had many- and I don't believe this is the appropriate venue to discuss it all, but suffice to say my experiences are rather common. Roofers and Engineers have all told us the same thing- the new construction buildings are all done poorly. Furthermore, I strongly suspect the Department of Buildings inspector was bribed. As I mentioned in other posts, if you want to buy a new condo- you should discount an additional 5% (or perhaps 10%) to account for construction quality problems.

Other problems not regarding initial construction quality- What if you have 1 or more owners default on common charges. The common charges need to be set high enough not only to account for a reserve account but also with the expectation that defaults can and do occur. Most developers set the common charges very low in order to make the development look more attractive. In my building, I became Treasurer at beginning of the second year- and hiked common charges by 30% in order to establish the building on a solid financial path. Not all buildings are as willing to take their medicine. I explained my position well, and was lucky no one fought me on the huge increase.

You might also have problems getting financing because of Fannie Mae restrictions- although a mortgage specialist can clarify this better than I can. In essence I know that Fannie Mae has some rule regarding any 1 owner having a stake of 10% or more (for risk purposes Fannie doesn't like this). I don't know if this is more toward investors or whether it applies to small buildings as well.

As to members of the board...well at one point- it was just me and one other person. It was a huge time commitment since we were small and self-managed. Ultimately the building is best serviced with at least 3 people- a President, Treasurer, Vice-President/Secretary. If you can get more- all the better.

i noticed that as well. I contacted StreetEasy about it.

anyway, had you already been aware that new construction is generally poorly built going into your purchase or did you find out the hard way?

about the boards, i would assume that being in such a small building (i saw a condo that had only 5 units!) would make it almost impossible to establish any kind of "democracy" you would get in a typical sized condo.

I knew going in to not expect perfection- and I believed that there would be some additional costs as a result of the developer cutting corners. I did however expect a certain level of compliance and build quality since there are rigorous compliance requirements that a building must meet in NYC. In our case the developer did whatever the hell he wanted- and to hell with compliance requirements. The Department of Buildings approved us- with no violations. Now that we are having an engineers report done- we are finding out that many things were not even remotely done to code. Our engineers report is not complete yet- but will be within a few weeks. Until then our attorney does not want to comment. However we have spoken to various managing agents in the process (based on what the engineers have already told us informally) and all have said the same thing- to be cautious about alerting the DOB otherwise they will require you to fix everything immediately or we will be fined. We will eventually fix all the problems- but the expense and hassles of fixing everything immediately is not realistic.

So the short answer to your question- I knew to be aware that new construction is generally poorly built- but I found out the hard way just how much worse it was than my assumption.

As far as a democracy goes- I actually see that it could go either way in a small building. When it was just 2 of us running the building- I was Treasurer and the President was a nice guy that really put a lot of effort in- but he just didn't get what it took to set us up to become financially strong. He wanted all sorts of items to pretty the building up- and I was fine with that- but only once we were in a strong position in a few years. I upset him greatly and some other owners- but now that they realize just how badly we needed a strong financial position- they are inclined to follow my lead. An engineers report is expensive. A lawsuit is expensive. Making the repairs are expensive. Making the building pretty can wait (i.e. landscaping, a roooftop deck, etc). I want the same things they want- let's just do it all in a responsible fashion.

thanks again for your help!

btw, streeteasy got back to me and said they fixed this problem with my post disappearing so i'm bumping it so others can see it now.