Buyers in condo-hotels across the country are turning to the courts to
get their money back, alleging that condo-hotel developers violated
securities laws in selling the units. The buyers argue that purchasing
a residential unit in a condo-hotel is akin to buying stock, and the
sales should therefore have been regulated by the Securities and
Exchange Commission. The SEC would require developers to use agents
licensed to sell both real estate and securities. But developers’ lawyers
say the legal argument doesn’t make sense. The decisions in these court
cases could determine whether the condo-hotel model survives. [more]

From the May issue: Like timeshares on steroids, condo-hotels appeared to offer the perfect real estate trifecta when the market was strong.
The units — which look like high-end hotel rooms but are sold as
condos that buyers can stay in for about a third of the year — were
long a win for developers, buyers and lenders.
Developers won because they were poised to reap profits both from
condo sales and from the money generated on the nights the rooms were
occupied by hotel guests. Buyers won because they were securing what
appeared to be an appreciating real estate investment and had access to
full-service hotel amenities. And financiers won because they were
lending money on what seemed like two sure bets: the condo market and
hotel market in Manhattan.