condotel

condotel

A relatively recent concept involving a melding of a resort hotel with condominium ownership. Initially became popular after September 11, 2001, when it became difficult to obtain financing of more than 50 percent of the cost of acquisition or development of a hotel property.To raise the additional necessary capital, developers sold individual units to investors and users, with the promise to rent the units to hotel guests and pay over profits to the individual owners.In recent years the practice has become less common with regular hotels, but remains strong with resort developments. The Securities and Exchange Commission, and several plaintiffs' law firms, have recently taken the position that such relationships involve the sale of securities, thereby requiring registration,disclosure,adherence to strict accounting standards,and many other requirements.