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January 19, 2007
New Dev Sizing: Double Counting
A: Here's something most people do not know. When it comes to the quoted size of a new development condominium property, some developers include the portions of all common areas such as hallways, elevators, lobby's, roofdecks, etc. that are allocated to an individual unit; also known as 'common elements'. So, for anyone who went to new devolopment sales office recently and was shown a floorplan that quoted a unit's size higher than it appeared to be on the layout, now you know why.
First, a little investigating into what common elements are defined as. Its called Real Property Law 339-i and goes into detail how the condo unit-owner's common elements are calculated.
According to Habitat Magazine article titled, "Condominiums: A Primer To Ownership Interestes":
An owner in a condominium has no lease. He/she actually owns a unit. That unit (usually an apartment), like a private house, is measurable. In Manhattan, such a unit is generally contained in a high-rise multiple dwelling. To get to that unit, one must walk through the lobby, ride the elevator, and walk down a hallway. These areas are used in common by other unit-owners to enter and leave their unit (apartment).
Additionally, embedded in the walls and floors of each unit (apartment) are girders, pipes and conduits, which service not only that unit, but also other units within the building. Accordingly, the legislature had to establish various forms of ownership so as to fully account for the ownership of the entire building in which an apartment exists. To solve this problem, they established "units" and "common elements." The units being the apartment in chief and the common elements being those portions of the building generally used by all other unit-owners to enter and leave each apartment, support the building, and bring all necessary services and utilities to a unit.
So, the legislature mandated the determination of one's percentage of common interest in 4 ways...
(a) proportion of floor area of the unit in relation to the floor area of all units
(b) fair market value of the unit in relation to the fair market value of all units
(c) equal allocation for each unit, or for each unit in a particular class
(d) floor space of the unit plus unique factors affecting relative values, such as availability of common elements for exclusive or shared use.
That last one seems relevant here. Let us review once more:
floor space of the unit PLUS unique factors affecting relative values, such as availability of common elements for exclusive or shared use
Jonathan Miller, of the amazing
Matrix blog, corrected me as I first thought this practice is common to ALL condominium units listed for sale on the open market.
Noah asks Jonathan: Stuck here trying to write a post about how the total size of a condo unit is quoted by most brokers and new dev sales teams. Wanted to point out that this total size INCLUDES the unit's allocated percentage of the common elements, which is why the apt size itself may seem smaller than the quoted size. Can you please CONFIRM or DISPROVE what I just stated? Is my thinking here correct? I investigated Real Property Law 339-i for this post to back me up.
Jonathan responds: No thats not true. The % of common elements is based on the total square feet of the unit / total square feet of all units in the building. This percentage is then used to allocate expenses. Lately we have been reading about developers who have been taking liberties with including common area in the square feet calculation, (double counting), so it makes the square feet look larger, driving down the ppsf.
Thanks Jonathan for a detailed clarification of this new trend.
UrbanDigs Says: The total square feet quoted on some new development condominium property listings includes the total common elements allocated to the unit-owner. Be sure to ask the sales team if the new development you are thinking of buying into has included the allocated common elements into the unit you are considering. Your attorney could explain this in more detail especially when the offering plan is reviewed before you sign any contract of sale! Its all about being educated!
Posted by urbandigs at January 19, 2007 10:11 AM
Your post just proves the point that it is foolish to rely on someone else's calculattion of apartment size or price per square foot. I have seen the size of a small apartment inflated by over 20% in a recent Manhattan development. It's better to compare room dimensions and usable square tootage when sizing up the value of an apartment.
Posted by: UWSider at January 20, 2007 8:04 AM
Posted by: Noah at January 20, 2007 9:29 AM
I have to admit, that when I went to the last new development the sales agent doing the presentation CLEARLY explained to my clients that the total sq ft quoted on the floorplans he gave us included the allocated common elements.
Im not sure if all new devs point this out, but I hop buyers read this article and ASK if they decide to go for a new dev unit. In the end, the price wont be adjustable, but getting incentives on closing costs or upgrades should be easy in todays market.
As for existing co-ops or condos, the buyer should use a broker that is knowledgeable about what 500 or 750 sft actually looks like, to confirm the size of the unit for pricing anaylsis later on; should the buyer decide to buy it. Too many times buyers work on their own, believe what they see, dont have any basis for comparison, and put a bid in BLIND, so to speak, to the seller agent hired by the seller to get the highest price possible for their client.
It just doesnt make sense to me.
Posted by: Noah at January 20, 2007 12:23 PM
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