Quote:


I have often wondered about the Manday/Avalon Tower.
Presumably when it was a rental, some number of people RENTED. As such, these people got certain state rights such as the right to continue living there for 3, 4 or 5 years depending on extensions. Those over 52 can claim an expemption from eviction for 40 years when a rental goes condon or coop and if someone buys the unit they buy the tenant and are prevented from asking untoward rents.

How did Mandalay avoid this? Or are there owners who have tenants still living in their homes? Does the developer own a block of rentals?

Gotta love sales talk where a developer equates signed contracts with closed sales...
look for Trump Tower to go rental soon as sales go belly up.

The Mandalay was a rental before it became a condo.

http://www.pinnaclecommunities.com/pages/news_view.php?newsid=8

When Condos Become Rentals

New York Times
By ANTOINETTE MARTIN
November 21, 2008

In a residential market that has generally become dicey, there may yet be a magic number for condominium buyers in New Jersey: 75 percent.



TAKING CONTROL At Mandalay on the Hudson in Jersey City, about 80 percent of the 269 units have been sold, while at the 440-unit Trump Plaza Jersey City, there are signed sales contracts for 85 percent of the units. According to New Jersey law, when sales reach 75 percent, the management control shifts to a homeowners? association.

?When a condo building is 75 percent sold,? said Brian M. Stolar, a developer, ?that triggers new opportunity and advantage for those buyers coming in after the threshold is reached.?

Mr. Stolar, the chief executive of the Pinnacle Companies in Chatham, explained, ?The building is legally under homeowner control after that point, and any new buyers are essentially shielded from the possibility of a developer deciding to take the building rental.?

Developers often decide to switch from condo to rental, or vice versa, depending on which way the market is turning. Mr. Stolar said that he was aware of several condo developers who were contemplating the switch at buildings where sales are going slowly ? or are even stalled ? right now. And he isn?t the only market watcher to see this as an issue for a number of builders.

Switching to rentals is ?a way to create cash flow,? he said, ?and the rental market is still strong? compared with the condominium market.

Pinnacle has one ?superluxury? project, Aurora Over the Hudson in Edgewater, at which only 25 percent of the planned units have sold after 18 months of marketing. Mary Boorman, a Pinnacle vice president, said the company had gone into ?slow mode? with Aurora. There is no plan to finish construction, and perhaps have to switch to rentals. She said the company would stop work until a higher number of sales was achieved.

At Pinnacle?s Mandalay on the Hudson building in Jersey City, however, 80 percent of the 269 units have been sold. Similarly, at its Siena at Montclair, 75 percent of 101 units will have been sold as of the next scheduled closing early next month.

Under New Jersey law, when sales on 75 percent of units at a particular building have closed, management control shifts to a homeowners? association.

Jeffrey Herrmann, a partner in the law firm of Cohn Lifland Pearlman Herrmann & Knopf of Saddle Brook, describes the process that ensues:

Within 60 days of hitting the sales mark, an election is held among residents, to choose a board of directors and a president of the association. Then, a ?transition study? is undertaken, in which the board hires an accountant to verify that the building owner has made all scheduled payments into the reserve fund for operating costs, and an engineer to certify that the construction is complete and sound.

This alone is a boon to subsequent buyers, Mr. Herrmann said. Before the transition study, all a buyer can do in the way of assessing overall quality is hire a home inspector to check out an individual apartment.

?If you buy in before the results of a transition study are known,? Mr. Herrmann said, ?you might find a situation where millions of dollars are required to remediate the problem, and in this economic environment, there may not be a source of money out there to get it done.? (He added that he once handled a case in North Bergen in which, during the transition study, a building was found to be sinking into the Hudson River.)

Dean Geibel, whose company Metro Homes is the builder of the new 440-unit Trump Plaza Jersey City, acknowledged that ?confidence builds for buyers when a building is over the 75 percent hump, stabilized and successful.?

Developers do have the right to rent out any unsold units even after a homeowners? association is in control, he noted ? but the rented apartments must be maintained and operated under conditions set by the association.

At the new Trump building, according to Mr. Geibel, there are signed sales contracts for 85 percent of the units, and closings have taken place for 50 percent.

At Gull?s Cove condos, another Metro Homes project in Jersey City, 75 percent of sales will be closed within the next month or two, he said; at Metro Stop, a nearly complete building in Hoboken, about 50 percent of the units are under contract.

The 315-unit first phase of the Beacon condominium project in Jersey City has 75 percent of its units under contract, according to the developer, George Filopoulos of MetroVest. But it has gone through a similar process before.

In 2005, the Beacon sold rapidly when work began on transforming its buildings, the Art Deco structures of a Jersey City medical complex, into condos. But as sales were set to close last summer, the home financing picture had drastically changed. The developer wound up putting 50 units back on the market, Mr. Filopoulos said, and at one point made them available as rentals.

With the recent shoring up of the mortgage companies Fannie Mae and Freddie Mac, he said, sales have picked up again: Seven condos have sold in the last eight weeks.

?Our building does offer the advantage of being close to 75 percent,? Mr. Filopoulos added. ?New buildings just coming on the market, with the way things are now, it will most likely take a long time for them to sell that many units.?