PURCHASING A CONDOMINIUM IN THE TURKS AND CAICOS ISLANDS
In recent years the condominium market in Providenciales has generated increasing interest and activity. Completed developments have to date have been located along Grace Bay’s ten mile beach and include high quality developments such as the residential “Grand View on Grace Bay” and condominium resorts such as “Ocean Club”; “Ocean Club West”; “Pointe Grace” and “Royal West Indies Resort”, While these figures indicate a buoyant market even in these uncertain times, a word of caution: buying a condominium can be much more complicated than buying a single family detached house. In essence, the purchase of a condominium unit is the purchase of (expensive) air space being the area between the inner surfaces of the floors, ceilings and walls their unit. The Strata Corporation, of which each purchaser will be a member, will own and be responsible for maintaining the rest of the building structure, including the walls, hallways, elevators, grounds, parking areas, plumbing, wiring and everything beyond the units inner surfaces.
On Providenciales, prospective purchasers are faced with a choice: whether to purchase a new condominium unit in a new development or purchase a resale unit in an existing development. There is no right or wrong answer to the question of whether to purchase a resale or a new condominium. While there are many advantages to purchasing a new condominium, purchasers of new condominiums should be aware that there are almost always construction issues. Naturally, these issues range in significance and are generally resolved without much difficulty however the attendant delays and occasional stress can dampen a purchaser’s initial enthusiasm for the condominium.
Perhaps the main advantage of a resale condominium is the benefit of speaking with existing owners about the development generally and obtaining from them an experienced perspective on the development and its operation. Prudent purchasers will make any offer to purchase contingent on their receipt and acceptance of a structural engineer’s report. The cost of the inspection and report will vary but will, according to Chris Conway of Civil Engineering Design Services, be in the region of US$750.00 and is generally paid by the purchaser.
To better inform themselves and to reduce the risk of buyer’s remorse, savvy purchasers will generally ask some or all of the following questions:
1. What are the monthly condominium fees and are they comparable with those of nearby developments? Are there any increases or special assessments planned by the Strata Corporation within the next twelve months?
2. What is the financial condition of the Strata Corporation and does it have a replacement or reserve fund? What level of fire and liability insurance has the Strata Corporation purchased?
3. Does the condominium development have professional management? If not, what is the reason for this? While smaller developments of two to six units usually cannot afford a professional management firm, larger developments should hire outside management. Typically, in the case of a new development, the management company will likely be associated with the developer; in the case of a resale unit, the management company may be more independent.
4. Do the By Laws of the Strata Corporation impose any unusual restrictions or obligations upon owners? In particular, watch for unusual limitations, such as a prohibition of pets or a forced rental pool. While such restrictions may be an attraction for some purchasers it highlights the importance of purchasers satisfying themselves as to the nature of the development into which they will be investing.
5. How many condominium owners own more then one condominium in the development? If the developer has retained and resides in one condominium, that’s excellent. However if the developer has retained a significant number of units and rents them to tenants, that’s bad. The reasoning in this latter respect being that should the developer default in the payment of its Strata Corporation fees, the Corporation could slip into financial trouble. Further, it is usually a good sign that a number of the owners own more than one unit in the development as it shows that they like the development and presumably believe that it to be a good investment.
6. Are there any special contracts or sweetheart leases with the developer? If you learn that the developer retains title to part of the development, such as a recreation area or parking garage/area, and rents it to the Strata Corporation, this is not a good situation as the developer can unilaterally raise the rent. It is however quite common for developers to retain as “out parcels” portions of the development upon which they will place facilities such as shops, bars and restaurants.
The developer or real estate agent should be able to provide much of this information without difficulty and any offer to purchase should be contingent upon the purchaser’s approval (or their attorneys’ approval) all this information.
In this regard, should you hire an attorney to assist you in the purchase? The prudent answer must be: Yes: the value of obtaining independent legal advice from an attorney who represents your interests rather than those of the developer cannot be overstated. No investment is risk free but retaining an experienced attorney who can assist you in navigating the pitfalls that can befall an unwitting purchaser can reduce much of the risk associated with any property transaction. In circumstances where condominium prices continue to rise and the number of condominium developments increases apace in the Turks and Caicos Islands, the potential cost of not taking advice will rise also and, accordingly, the maxim caveat emptor is as true today as ever before.
Finally, do not be dissuaded: condominiums can be wonderful personal residences and excellent long-term investments. However, purchasers can’t ask too many questions before taking the plunge.