Condo deconversion has remained a hot topic in the world of Chicago real estate.
Learn more about this unique process and how it has impacted condos and apartments alike in the Windy City.
Understanding the Condo Deconversion Process
According to the Illinois Department of Financial and Professional Regulation, Division of Real Estate, “deconversion is the process of selling the entire condominium property to a third party who will turn the condominium units into rental apartments.”
Condo deconversion remains a popular trend in large cities, especially Chicago.
For deconversion to happen, a Homeowner’s Association must have to vote in favor of the process. In Illinois, the sale of the condominium only moves forward if the majority of owners vote yes to the deal.
If HOA voting proves in favor of selling the building to an investor, the association will hire an experienced appraiser to determine the appropriate value of the building.
Afterward, a real estate broker will help navigate the sale between the HOA and interested investors. Owners will then receive an appropriate percentage of the sale based on their percentage of ownership.
The Advantages of Deconversion for Condo Owners
So why would condo owners consider the sale of their entire building? Well, for starters, financial incentives.
Condo deconversion may be the perfect move if homeowners are looking for a way out, especially if their property appears to be depreciating. This is often the case if multiple owners have attempted to sell and haven’t been able to achieve the desired sales price, or the building is needing substantial capital improvement.
Typical deconversion investors are looking for older buildings, usually constructed before the 1970s.
Owners may be better off taking the profit from a deconversion sale than keeping or selling their individual unit.
Condo Deconversion in Chicago
Before October 2019, 75 percent of HOA members had to vote ‘yes’ for the sale of the condo for deconversion to pass in Illinois. Now, there is an ordinance enacted requiring 85 percent of unit owners to approve the transaction.
This legislation was put in place to slow down the condo-to-rental trend in Chicago. However, despite this restriction, deconversions are not going away.
Most of the deconversions that are still taking place are happening where the bulk of Chicago condos are- on the north side and downtown.
Among Chicago’s deconversions, Windy City serves as a prime example. After years of negotiations and months of legal wrangling, this South Loop condominium property finally sold to Marc Realty in late 2018. Now, this iconic building boasts luxury rental units.
1250 N Lasalle also recently experienced deconversion. This Old Town building transformed from condos to premier apartments only last year.
While condo deconversion has decelerated a bit in Chicago, it’s safe to say this trend is not going away anytime soon.