Is a Commercial Condominium a Good Fit for Your Business? This is a question that an experienced Commercial Real Estate Agent can help you answer. It will depend on the type of business you have, and on the size of that business.
What is a Commercial Condominium?
A commercial condominium is a suite or unit that you can own, similar to a residential condominium, but instead of living in it you operate a business from it.
- You will own the interior of your condominium/suite/unit, and
- An undivided or proportionate interest in the common area, land, and building owned by the condominium association, based on your pro-rata share.
- The pro-rata share is usually based on the percentage of square footage owned.
- The CAM or condominium association fee is based on the pro-rata share.
- The condominium association will manage, maintain, and be responsible for the common area, land and building(s).
Purchasing a Commercial Condominium is similar to any other commercial purchase.
- You will usually execute a purchase and sale agreement with an initial agreed upon deposit.
- You will then have a due diligence period.
- This is the period defined in a real estate contract allowing the buyer and or their agent to thoroughly investigate a property, to determine whether the buyer remains satisfied with the property, before finalizing the purchase.
- If the buyer’s investigation uncovers defects with the property, the buyer may either propose a solution to the seller or cancel the purchase, according to the terms of the real estate contract.
- Your deposit is usually refundable during this initial due diligence period. After the due diligence period your deposit will become hard or non-refundable.
- An additional deposit may also be due at the end of your due diligence period.
- The closing of the sale will occur within a specified number of days from the effective date of the contract.
Condominium Ownership Advantages vs Leasing Disadvantages:
Ownership Advantages
What Owning a Condominium means:
- The interior of your suite/unit will be your responsibility.
- A condominium association, which is owned pro-rata, by the suite owners, will manage the exterior and common areas of the property, including the roof, exterior walls and windows, parking lot, landscaping, etc.
- The Board of Directors, who are usually elected by a vote of suite owners, are responsible for budgets, management, and election of officers for the Board.
- The Board will present a budget and the members will be entitled to discuss and vote on it, typically at an annual meeting.
- The association will budget money for regular common area maintenance, and long term capital improvements, such as parking lot resurfacing and re-roofing.
- Each unit owner will pay an annual pro-rata condominium association fee to cover such common area expenses.
Differences in Condominium Interiors:
After closing, you will commence the interior design or build out of your suite, usually at your own expense. If your suite/unit was previously used, then it may be move in ready or need some updating. If this is the case, you and your agent may be able to negotiate for some Tenant Improvement (T.I.) credit to help cover the cost of renovations.
Shell Condition
If your Condominium is new, it will probably be in shell or vanilla shell condition.
- Shell – usually means that fire sprinklers, electric and plumbing are brought into the unit, but you will have to design and build out everything else.
Vanilla Shell Condition
- Vanilla shell – usually means that it is, or almost is, in move-in condition, and you may only need to paint and/or pick out some floor covering and fixtures.
TIP
In order to maintain quality control and keep everything to code, you should employ an experienced, licensed Architect and General Contractor. Unless you’ve previously dealt with architects and general contractors, you should turn to your agent for advice regarding qualified professionals. If your agent is experienced in the commercial arena, then he or she probably has contacts they can refer you to.