For owners, one of the joys of condo living is the ability to control their own destiny. The owners’ associations have virtually complete control of the comings and goings of their high-rise homes, like a vertical version of a gated community. It’s this level of control that attracts so many strivers to condo living — the urban convenience of an apartment with the added bonuses of traditional residential life. It’s the American dream, with all the amenities and a view to boot.
But communal control of a building isn’t automatic.
The day the first unit is closed is not the day the power transfers from developer to resident. Tennessee’s Condominium Act, passed in 2008, regulates — in a sometimes-byzantine way — when the keys to the kingdom pass to the folks within.
The short version is that once 75 percent of the units are sold, the developer has 120 days to hand over control to the owners. There are exceptions and timelines for slow-selling condos — seven years from the first unit, five years from the day the development was 25 percent sold, and so on. But even in the boom-and-bust world of Nashville condos, where many were built quickly, a subsequent land rush happened and then a dramatic slow-down has stalled everything, those exceptions are not yet in view.
Nashville’s condos stand at a strange crossroads. Developers continually under pressure from increasingly impatient banks look nervously over their shoulders at lenders who are seeking cash. And condo residents, knowing that, as yet, they aren’t the power players they thought they would be, cast a weary eye at the nervous developers.
Terrazzo stands perilously close to this crossroads. With 81 of its 117 units closed, it stands at 69 percent sold, just 10 units shy of the magic number.
Like most Nashville condos, Terrazzo has had its problems: lawsuits under the esoteric Interstate Land Sales Full Disclosure Act of 1968 are extant. Other suits flew between contractors, subcontractors and the project’s developer, Crosland. Mechanics’ liens were levied. Bill Barkley, once Crosland’s Nashville point man, has moved on. He incorporated his own company — City Development — in September. He’s been replaced by out-of-towner Burgin Dossett on Crosland’s website.
But as recently as Nov. 12, Barkley was still signing off on sales at Terrazzo as a representative of Crosland Manager LLC — one of a number of Crosland-branded, North Carolina-incorporated limited liability corporations that have appeared in Nashville deeds in the last 18 months.
Officially, Terrazzo itself is held by CJUF II Terrazzo LLC, but a number of units have been sold in the past year under the auspices of Crosland Manager, Crosland Terrazzo, Crosland Tennessee, Crosland Southeastern Investments LLC or some combination thereof.
It’s made some of the longtime owners nervous.
“It all stinks. We don’t know who we’re dealing with,” one told The City Paper.
The change in local leadership at Crosland doesn’t help, and neither did the November 2009 fire sale of 30 units at auction. Some of them sold at steep discounts, depressing prices and upsetting early adopters who figured the low asking prices would drive down the value of their units.
As manifested by the Land Act lawsuits of the last year, the relationship between developer and owner has been uneasy for a while. Under the Land Act, buyers are entitled to highly detailed, regularly submitted reports on their property before signing a contract. Several Terrazzo owners have filed suit, claiming violation of that law and that an “elaborate dodge” is being perpetrated by the developer. Developments of 99 units or fewer are not subject to the terms of the Act. Thus, the lawsuits claim, only 99 were marketed for sale by CJUF, with the remainder being marketed by various and sundry Crosland LLCs.
Several of those cases were dismissed, not on the merits of the argument but because the plaintiffs hadn’t made a suitable claim that they had been damaged.
Turning to apartments
Nightmarish tales out of condo developments in Nevada, Florida and California don’t make local owners feel any better.
In one Arizona condo, for example, the board of directors — still stacked with developer appointees — told owners that access to common areas, like the pool and courtyard, would be limited to two hours, while the parking garage would only be accessible after 6 p.m., forcing commuters to wait with their cars outside the garage. In Florida, a common strategy for developer-controlled projects is to jack up homeowners association membership dues by 300 percent, citing the need for maintenance. Increased fees, coupled with mortgages, lead owners to cut their losses and get out.
Until the owners take control, the power at the condos rests with the developers. And if the developers need a quick cash influx, leasing units as apartments makes more sense for a short-term push than waiting on the market to thaw.
But that often means driving the owners out. No one can make someone sell property, but a dictatorial developer can make living in a condo unpleasant. Condo owners out West report draconian restrictions on amenities — limiting pool access to two hours in the middle of the night, prescribing that parking spots be vacant between, say, 7 a.m. and 11:30 p.m., and, yes, faceless shell owners buying up still-vacant units to maintain control.
That doesn’t seem to be happening in Nashville — at least not yet. Terrazzo is actually one of the healthier new-build condos in Music City, and Crosland doesn’t appear to be buying units under shells, just selling them. That’s another hint they might be simply trying to avoid Land Act lawsuits from nervous owners.
A Crosland spokesman said the various LLCs are a standard device for a long-term, large-scale real estate project, especially among mixed-use ventures that require outright sales to residential buyers and a mix of sales and leases to commercial users. With a company as big and active as Crosland, numerous subsidiaries are bound to be involved in high-profile projects.
And with a handful of new purchases, the point would be moot — at least at Terrazzo.
But at some of Nashville’s less robust condo projects — notably Velocity in The Gulch — more overt changes are being made. Velocity was taken over in a friendly foreclosure, reverting control to Compass Bank, which, according to sources, is marketing the building not to individual buyers but to cash-rich real estate investors. A deal dramatically changing the nature of the project could be announced any day.
If and when it is, expect owners at Terrazzo and other projects to cast a nervous eye.