What happens when a builder cannot sale certain units/penthouses

[yaz16]

My friend who has lived in his new condo for 2 years now still has a few penthouses not sold. Who actually ends up paying for these unoccupied units? The residents via maintenance fees? Even with heavy incentives what if it never gets sold?

These days i notice people who can afford penthouses at std condo's buy non penthouse units at luxury condo buildings more and more.

I guess if i had 2 million dollars i would also buy a large unit from the ritz carlton or four seasons vs a penthouse unit from a std condo building also (better amenities and chance of resale)

 

[cdr108]

for that kind of money, some would desire more exclusivity and higher end features than a PH from an average condo building, even with the upgrades.

the luxury buildings tend to have fewer units per floor, hence less wear/tear, traffic, etc.

 

[nhincompoop]

My understanding is that after final closing, the builder takes title on any unsold units. Then as the registered owner, the builder would pay all maintenance fees due to the condominium corporation and property taxes to the municipality.

Unless there is some special arrangement between the condo corporation and the builder to cover the unsold units' maintenance fees (unlikely for a board to agree to this), everyone just pays for the share they own.

 

[cdr108]

My understanding is that after final closing, the builder takes title on any unsold units. Then as the registered owner, the builder would pay all maintenance fees due to the condominium corporation and property taxes to the municipality.

Unless there is some special arrangement between the condo corporation and the builder to cover the unsold units' maintenance fees (unlikely for a board to agree to this), everyone just pays for the share they own.

except the first year board tends to be represented by the developer and it's affiliates, so what happens behind the scenes ?!?

 

[nhincompoop]

I guess it depends on what's laid out in the disclosure statement when all purchasers first buy, and that's usually written on the assumption that all units will be sold, with allocated common expenses to each unit based on size. If it turns out that the builder doesn't sell all the units and stacks the board in its favour, it may still require a majority of owners to vote to support the changes to the disclosure statement.

CDR, you raise a good point. Developer-friendly boards of directors are common in the first year a condo corporation is formed. If we see the predicted slowdown materialize and see builders holding on to excess inventory after turnover, then you've emphasized an important question purchasers need to ask their lawyers when buy.