Boutique Condos

The word boutique alone conjures up many positive thoughts and images before one even sets foot inside the condo.

But surely a building with only ten units could cause a few problems, no?

I’m always weary of small condominiums because of the potential for the ever-lurking special assessment

boutique.jpg

www.dictionary.com defines “boutique” as:
Noun: a small shop or small specialty department within a larger store, especially one that sells fashionable clothes and accessories or a special selection of other merchandise
Adjective: of, designating, or characteristic of a small, exclusive producer or business

On a less serious, overly-cynical note, is it necessary to say that a store sells “fashionable” clothes?  Are there stores that sell “unfashionable” clothes?  Perhaps there is a store called, “Ugly & Fat” that specialize in awful, unflattering clothing that is unfashionable?  I don’t see merchants in the clothing business advertising their products as “unfashionable,” thus I would make the assumption that ALL merchants sell clothing deemed to be “fashionable.”

Moving on…

In the real estate industry, we use the term “boutique condo” to describe any building that is small(er) in stature.  The term is thrown around a little too freely, and I’ve seen condos such as Zed Lofts with 50 units being described as a “boutique condo.”

There is no correct mathematical formula to deduce what is or isn’t a “boutique” condo, but perhaps as the growing trend to construct 50-storey, 500-unit buildings continues, one day we’ll call a 70-unit building “boutique-ish.”

A few weeks ago a client of mine named Zara was interested in a condo at 81 Front Street.

The location is simply fantastic.

Located above the retail storefront on the most vibrant strip between Jarvis & Church, this building is in between the LCBO and Starbucks, and a baseball-throw away from the St. Lawrence Market.

This strip of retail has been in existence since the late 1800’s and the condos incorporate all the typical “hard loft” features that are prevalent among older conversion projects.

So if the neighborhood, the building, the unit, and the price all received a passing grade, what didn’t I like?

Well, this “condominium” has only 6-8 units.

And that raises a huge red flag with me.

Think about what a condominium is at the simplest level; it’s a corporation with many different owners or more specifically, partners.

Unlike a co-ownership where the individuals are true partners in the building (owning shares or a percentage of the building), condominium owners own their own suites but still have a shared ownership and interest of the common elements.  This also comes with responsibility.

The owners are responsible for the building and the costs of maintaining it.

Obviously a 500-unit building costs more to run on a day-to-day basis than that of a 6-8 unit building, but those costs can be spread out over the five-hundred owners, which is a huge relief in the event of a large expenditure.

With five-hundred owners, the reserve fund is much deeper, and a major repair or renovation can be paid for by one or a combination of monies in the reserve fund and a special assessment.

But what if the roof caves in on a “boutique condo” that is home to only eight units?

What if the cost to repair the building is $80,000?

Imagine getting hit with a $10,000 special assessment!

Or what if the repairs are going to cost $150,000?  $300,000?

I’m not claiming that smaller, “boutique” buildings are mismanaged or poorly run.

I’m just saying that as an owner, you have fewer partners in your condominium corporation, and it’s a lot more intimate than that of a 100, 200, or 500-unit building.

A unit came onto the market today at 468 Wellington Avenue West for $2,985,000.  This unit is the entire floor six-storey building, and is over 5000 square feet.

The maintenance fees for this unit are only $690/month, or an unfathomable $0.14 per square foot.

Comparatively, I mentioned in my post last week that most condos in the downtown core have fees between $0.55 – $0.70 per square.

Don’t get me wrong, I’m not complaining about the low fees!  I’m just saying that with only eight units in the building, and with only $0.14 being collected per square foot of living space in this building, there is no way that any money is being kept in the reserve fund.

The maintenance fees paid by the eight owners of this small boutique condo every month are being used to run the building, and there is no piggy-bank to stuff for that rainy day.

I’m convinced that if ANY single out-of-the-ordinary expenditure had to be made, the owners would have to huddle up and decide who is to pay for what.

Is there any way that twice-yearly jobs such as carpet cleaning and window washing could be paid for with the minimal maintenance fees generated by this condo?  I doubt it.

I would absolutely LOVE to live in this condo; who wouldn’t?

But boutique condos can be expensive, and there is always that oft-chance that somebody knocks on your door one day and asks you to make out a cheque for $28,000 for “general repairs.”

Perhaps there is a middle ground?

180 Frederick Street is a boutique condo of 40 units, and 261 King Street is only 28 units.  These condos are small in stature, rarely on the market, and provide an intimate living experience.

261 King Street, or “Abbey Lane Lofts” is a four-year-old building, so I wouldn’t expect any major renovations or repairs in the near future, and thus having “only” 27 other partners to split costs with isn’t really an issue.

I’ve seen condominiums with as few as four units.

It’s tantamount to having three roommates, really.

And if you’re that close to living on your own, perhaps you should be looking at houses anyways..

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  1. Krupo says:

    Funny – have you seen projects where a house *IS* converted into a four-unit condo? I can point you towards one that’s in construction right now… I was a bit shocked and surprised to learn of it.

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