Rising rents are encouraging real estate investors to buy out condominium buildings and deconvert them to rental units in Chicago and across the country. While some condominium owners are comfortable with selling their buildings, many others feel pressured and bullied into these sales and are looking for ways to raise the threshold on existing condominium laws and regulations.
It takes 75% of unit owners voting in favor of a sale to allow it to happen, per Section 15 of the Illinois Condominium Property Act. State Senator Heather Steans (7th District) and State Representative Sara Feigenholtz (12th District) are looking to change that. Both have indicated support for legislation that would increase to 85% the percentage of unit owners needed to allow a sale.
Gene Hendricks and Scott Free are condominium owners who heartily support the proposal to require 85% of owner consent before a sale. Their lives have twice been impacted by condominium deconversion. The trauma they have endured during the process is real, and it is trauma that is felt by other homeowners as well.
Gene and Scott bought a condominium unit in a building at 5815 N. Sheridan in 2011. They were sure this would be their forever home, and they settled into life there. In 2017, unit owners were notified that a broker estimated sale of the 188-unit building could yield $38-42 million. At the same time, the management company started warning tenants that they would be hit with a large special assessment to cover deferred maintenance issues on the building. By the time the sale went through, it closed for $27.2 million. Gene and Scott were forced to move.
“Section 15 deconversion sales are based solely on the owner’s percentage of ownership, said Hendricks. “They do not, however, take into account the upgrade dollar amount the unit owner might have recuperated by selling the unit on his/her own.”
Feeling frustrated and uprooted by the sale of the 5815 N. Sheridan building, they found a new home at 5757 N. Sheridan. They were assured the building was not targeted for potential sale. Within three weeks of moving in, they received a letter from the Board Association inviting them to an informational meeting hosted by real estate broker firm CBRE to discuss condominium conversion.
“My concern is that none of the hype about condo deconversions discusses the aftermath of relocation nor the unaffordable cost to find similar residence in Edgewater,” said Hendricks. Many of my neighbors then and now are retirees, seniors and homeowners underwater with mortgage payments. They got the short end of the stick and were forced out of a community that they have known for decades.”
These condominium owners are not alone in their concerns. Fellow residents at 5757 N. Sheridan feel like the potential sale is hyped and overpromised, and it encourages more owners to agree to the sale. Even whispers of a potential condominium deconversion can have a negative impact on unit sales in condominium buildings.
We are also experiencing this issue for the third time in Lincoln Park and on Belden and Lincoln Park West where the community is seeking answers from Francis Parker School and some of their building boards. These residents are outreaching to 43rd Ward Alderman Michelle Smith to consider downzoning and discussions relating to possible consideration of a Chicago Landmark District. Neighbors are concerned that the buildings will be sold, deconverted and demolished.
In addition to requiring 85% of owners to agree to a sale, advocates for changing the state law would also like to see:
- Clarify in the law that it is the percentage of ownership and not the number of units that determine votes;
- The Board alone can reject an offer, but listing the property for sale requires an 85% vote;
- Require an audit of unit votes for a sale. The South Loop River City condominium deconversion vote was audited, and the results were different or varied;
- Require buyers to notify objecting owners that they are entitled to relocation costs required by the sale, and establish stiff fines for buyers who do not meet this requirement; and
- No unit owners can get additional compensation outside the building sale proceeds.
Feigenholtz advanced HB 2501 in the last legislative session, but it did not advance out of the Judiciary Committee.
For the condominium owners who met with Sen. Steans last week, it is an issue of taking away their relatively affordable housing and forced displacement of unit owners. “It (condo ownership) was once security,” said Free. “Now it’s gone.”