Should You Buy an Apartment in a Smaller Boutique Building?

Generally speaking, no. We believe the cons outweigh the pros when it comes to smaller boutique buildings. Not only will you have fewer neighbors to share expenses and liabilities with, but the impact of any crazy neighbors is supersized as they’ll much more likely be on the board. Furthermore, a smaller building typically means fewer competent candidates with the free time and the desire to volunteer for the board.

On the other hand, apartments in boutique apartments are more rare, and the privacy and the exclusivity that comes from living in a smaller building tends to help boost valuations.

As a result, if you want to avoid the mega-towers and live in a more intimate setting, we recommend buying an apartment in a smaller building, but not too small. We think the sweet spot is a building that has more than 10 units, but less than 30 or so units.

Larger share of any building expenses or liabilities

One of the biggest risks to buying an apartment in a smaller boutique building is the fact that you’ll be responsible for a greater proportion of any building wide expenses or liabilities.

Whereas in a larger apartment building with 100 or 200+ units, you typically won’t have to worry about being unable to afford a hefty, surprise condo or co-op special assessment due to the sheer number of neighbors you’d get the split any bills with, in a smaller building you might only have under 10 or under 20 units total with whom to split costs with.

Boutique buildings are typically defined as condo, co-op, condop or rental apartment buildings with 20 or fewer apartment units.

Cons of a smaller boutique building include fewer units to share building costs, outsized impact of crazy neighbors & fewer volunteers for the board.

Everything is expensive in New York

If you’re buying an apartment in a smaller building in NYC, you’ll need to understand that everything from labor to materials is prohibitively expensive in New York.

Contractors blindly assume that you’re filthy rich just because you own an apartment in Manhattan, and they won’t hesitate to give you arbitrary quotes out of thin air, simply because there’s a chance that a wealthy New Yorker won’t bother bargaining at all.

City violations can be expensive to remedy

When it comes to money, New York City’s various government agencies can cause some serious damage to property owners.

For example, a boutique condo with 10 units that fails a Local Law 11 inspection and has their building rated unsafe will face an enormous amount of headache and monetary loss.

Not only will the building have to pay thousands per month to rent a scaffolding immediately to prevent any injuries to pedestrians from falling bricks and other materials, but the building will have to spend hundreds of thousands or even millions to repair the facade.

If the building happens to be landmarked, prepare for an even bigger bill and an even longer time to complete any facade repairs. The LPC is known for requiring bureaucratic approval for any minute change to the exterior of a landmarked building.

How fun do you think this will be for you if you only have 9 other neighbors to share the cost of this debacle?

A Full Service Listing for 1%

Sell your home with a traditional full service listing for just one percent commission.

Fewer people to volunteer for the board

Fewer neighbors means fewer competent, willing and honest people who might be open to serving on the condo or co-op board.

This can actually be a serious issue, especially in luxury, boutique condominiums where all the owners are presumably very busy with their jobs. As you can imagine, it can be very hard to find an owner who’s willing to devote serious time to the job of being a board member.

The worst case scenario is a board composed of unwilling board members who don’t pay any attention to what’s going on in the building.

In this situation, you may have a managing agent that essentially has total control of what happens in the building, and a unresponsive board that essentially rubber-stamps anything that the managing agent suggests.

This is an extremely dangerous situation to be in as it can lead to costs spiraling out of control. Remember that the managing agent isn’t paid more if the building saves money, so there’s little incentive for a managing agent to fight to keep costs down.

As a result, a managing agent that goes unsupervised by a board will typically make a low effort in soliciting multiple competitive quotes for a big job, meaning that all owners end up overpaying.

Furthermore, a managing agent may not make an effort to dispute rate increases from vendors and service providers, and essentially push the board to approve all rate increases without bothering to push back or solicit new quotes.

Crazy neighbors have an outsized impact

Living in a small building means any crazy neighbors you might have will have an outsized impact on not only day-to-day life in the building, but in how the building is run.

The impact of a crazy neighbor in a small building cannot be overstated, especially if this crazy neighbor is involved in building politics and is in a position of power.

For example, having one crazy neighbor in a 10 unit building vs a 100 unit building is infinitely worse because the crazy neighbor is much likelier to be elected to the board in the smaller building.

It’s harder to avoid being impacted by a crazy person in a smaller building vs a larger building where they can be avoided.

A crazy person on the board means corruption or even litigation

A crazy neighbor gaining a board seat in your boutique building might lead to self-dealing, corruption and even litigation in your building.

It’s fairly common for a crazy neighbor serving on the board to have no sense of what’s right or wrong, and to essentially self-deal to the detriment of everyone else, perhaps because they believe they deserve to be compensated for serving on the board.

A classic example is a board president who insists on overpaying a part-time super a salary of $20,000 a year, just to spend a few hours each week taking out the garbage. Why would the board president do this when the average wage for a part-time super with limited responsibilities is only $5,000 a year?

Because he or she utilizes the part-time super as a personal handyman, and frequently calls upon the super for personal favors without telling anyone else. Essentially, the board president has co-opted the building’s part-time super as his personal servant.

In a similar vein, a corrupt and crazy board member might actually take kickbacks from contractors who over-charge the building for very large jobs. For example, the board president illegally pockets a cash kickback of $25,000 on a $100,000 roof repair job that should have cost $50,000.

The board president pushed for and picked the higher cost contractor because unbeknownst to everyone, he was getting a secret referral fee.

Lastly, it’s important to remember that all of this craziness usually ends up in litigation once other neighbors discover the extent of the treachery. This leads to the building suing people and neighbors suing each other, all of which are terrible for the building’s finances, and can lead to units being unfinanceable or unsalable.

Our Discretion, Your Advantage

Our traditional partner brokers never openly discount which means less disruption and better execution for you.

Rarity can result in higher valuations

A rare upside of buying an apartment in a smaller boutique building is that you won’t have hundreds of competing units to deal with when it comes time to sell.

By default, your unit will be rare because there may be years in between when units in your building come to the market for sale. And when units do come on the market, they usually are the only listing in their building.

This is especially true if your boutique building is in a coveted or historic neighborhood, such as the West Village or Meatpacking District.

In fact, you’re most likely to find boutique buildings in Lower Manhattan neighborhoods like the West Village, Soho, Meatpacking District, Tribeca, and the Lower East Side.

There might also be a lift in valuations due to the intimacy and privacy that comes from living in a smaller building. The privacy that comes from a smaller number of people in a building tends to lend an air of exclusivity, which in itself can lend perceived value and increase the valuation of an apartment.

Save 2% On Your Home Purchase

Our partner brokers are some of the most experienced and reputable in the industry.

Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. Hauseit LLC is a Licensed Real Estate Broker, licensed to do business in New York under license number 10991232340. Principal Office: 244 Fifth Avenue, Suite 2950, New York, NY 10001.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top