What happens if your condotel goes bankrupt?

[Senechal]

Does anyone here own a unit in a condotel? A friend of mine asked me this question last night, and I admit to drawing a complete blank. "What happens if you own a unit in a condotel and the hotel/building goes bankrupt?"

I know that in normal condominium buildings it's a question of dividing the debt among the condominium owners (shareholders) and either creating new debt, or raising fees or a combination of the above. In the event that this can't be accomplished, each owner owns a percentage of land that the condominium sits on.

But... none of those things can apply to foreign owner in a Condotel. (Or am I wrong?)

It seems to me that there's not really any way to divide debt among residents as the residents (in total) represent a small share of the overall business (which is primarily a hotel).

Secondly, as a foreigner you can't own land -- so giving you a percent ownership of the land the condotel sits on isn't an option either.

So are condotels the worst investment class ever?

It seems to me that condotels offer a 100% risk scenario from which there's potentially no recourse to foreign owners.

Am I looking at this right? Are there any condominium owners who own a unit in a condotel here?

[trogers]

Logic would dictate that all profit or loss are equitably shared.

Would you have raised such an issue if the condotel made a profit?

[Senechal]

trogers,

Yes that it is my conclusion as well. And this is a 100%, black-and-white difference in that case from being an owner in conventional condominium, where "loss" is determined by a far different set of criteria than the hotel business which is a vastly different business model.

The issue here is that the business operations of the hotel aren't within the voting rights of the juristic condominium owners which have a very small minority ownership.

The issue isn't 'complaining about loss' and being 'accepting of profit' as you seem to be drawing a line between. The issue is that condominiums are typically low-risk enterprises, and hotels are high risk.

[trogers]

If the hotel portion of the development goes into liquidation, its assets will be seized and auctioned off, and the new owner will take over and still run it as a hotel. The whole development cannot be sold off and building demolished when there are minority condominium owners holding chanotes on the development.

The only grey area I anticipate is the rights to use common area, which is a grey area in most mixed residential and commercial development.