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05/29/07: The Quagmire Called Square Footage

Q: We are under contract to purchase a downtown condominium unit. This is a resale situation. The seller’s real estate agent has represented the unit to contain 860 square feet. However, when my wife and I physically measured the apartment, we can only come up with 830 square feet.

Is there a formal method of making these measurements? Obviously, we do not want to pay more than we are actually getting.

A. There is an old expression that when there are two lawyers, there will be three opinions. In real estate, when you are trying to analyze square footage, you may actually get four or five opinions.

Measuring square footage has become a hotly debated topic to which there is no real answer. Although there are industry standards when measuring single family houses and office and apartment buildings (which are often ignored anyway), to the best of my knowledge, there are no such industry standards for measuring condominium and cooperative apartments.

The American National Standards Institute (ANSI) has published a document entitled “Square Footage – Method for Calculating” (ANSI Z765-2003). However, it only applies to single family houses. For attached properties (such as town homes – which we used to call “row houses), ANSI states that “the finished square footage of each level is the sum of the finished areas on that level measured at floor level to the exterior finished surfaces of the outside wall or from the centerlines between houses, where appropriate.”

Note the words “exterior” or “centerlines”.

In a condominium unit, however, developer attorneys who prepare the legal documents tell me that they try to get the engineer who is preparing the measurements to follow the unit boundaries as are spelled out in those documents.

In a condominium, there are two important legal records: the Declaration and the Bylaws. The former creates the condominium and contains basic concepts, including a definition of units, common elements and limited common elements.

Here’s an example of a definition of a unit from a local District of Columbia Declaration:

Each Condominium Unit includes the horizontal space between the Unit side of the exterior walls of the building and the finished walls separating the Unit from corridors, stairs, and, where applicable, to the surface of the finished walls of those interior walls which separate one Unit from another Unit. Each Condominium Unit also includes the vertical space measured from the (topside) surface of the subflooring to the finished (exposed) surface of the ceiling of such Unit.

Note that this refers only to the inside of the unit. In my opinion, that is how condominium square footage should be measured.

However, many developers have opted to go the ANSI route – namely measuring from the centerline of the walls between the units. If, for example, the outside wall is 12 inches thick, that would add at least half a foot more to the overall area.

One calculates square footage by multiplying a room’s length by its width. Thus, a room that is 12×18 will contain 216 square feet. However, if you add the 6 inches to our example, you get a little more than 231 square feet – but no more usable (livable) space in your unit.

Why do developers want to increase the square footage? There are two reasons:

First, because too many potential homebuyers are literally “hung up” on the amount of space they will get, using the “centerline” approach clearly makes the unit more attractive.

Second, adding more space will decrease the cost “per square feet”, which is yet another issue of major concern to a number of consumers. In our example, if the unit price is $400,000, 830 square feet equates to $481.93 per square feet, whereas the centerline approach brings this number down to $465.11 a foot ($400,000 ÷ 860).

One condominium developer’s attorney from the West Coast recently told me that he worries about the potential liability for misrepresenting the unit area and violating his state’s condominium act. That act – which is similar to the laws in many states (and the District of Columbia) requires that the declaration state the approximate area of this unit. According to this attorney, “this implies to me that the surveyor should measure according to the boundaries. In a ‘walls, floors and ceiling’ condo, this rule should mean excluding the thickness of the walls, and excluding limited common elements such as patios, storage areas and garages.”

Does this mean that the developers are engaged in misrepresentation?

For the great majority of developers, I do not think that is the case. There is no uniform standard for measuring condominium units. If the developer – and its engineer who physically does the measuring – decides to use the standards for single family homes, so long as this method is fully disclosed to potential consumers, that is perfectly legal.

One appraiser told me that in the l970’s when the condominium market started to heat up here in Washington, most developers used the centerline approach. The appraiser calls this “midwall to mid-wall”. However, in recent years, this has shifted to what he calls the “paint-to-paint” approach, which more accurately reflects the true net usable space within the apartment.

The older condominium units will continue to perpetuate the problem you are facing. Once the square footage has been determined, it is literally “carved in stone”. Sellers obviously want to get the best price for their unit and are reluctant to lower the square footage which has been associated with their unit for a number of years. Real estate brokers rely on the printed material and information in the historical legal documents, of which the area information is often a part. And lender’s and their appraisals still favor the earlier middle-wall to middle-wall approach.

However, this appraiser advised me that although he will use the stated information when he prepares his report, he will also do his own measurements. If he discovers that the estimates submitted by either the seller or the real estate agent are not the same, he will note this as a footnote to his appraisal report.

As you can see, this is a thorny and complex area. However, does it really make a difference what the square footage is? Are you happy with the unit? Are you comfortable with the price? Have you made sure that your furniture will fit in the new apartment?

I believe that too much emphasis is being placed on square footage, since it is but a small aspect of purchasing a condominium unit – whether it be new from a developer or a resale. However, since this has become a hot-button, and extremely controversial issue, I strongly urge the real estate community to press for a uniform standard.

There is such a standard for single family homes and commercial properties. Why are condominiums being ignored?