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Adobe Stock September 28, 2022 Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation's leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Bankrate logo The Bankrate promise
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Condominium conversion is the process of converting , which are leased by the occupants, into condo units, which are . Such conversions can take place in any building where tenants live in separate units, including apartment buildings, attached row or townhouses and cooperative buildings that have tenant shareholders. In some cities, condo conversions also take place in former commercial buildings that are being renovated or re-zoned for residential use. What is a condominium conversion
Condominium conversions turn rental units into an individually owned condominium (also called , for short). Additionally, the condominium conversion means renters who become owners share common areas, like fitness facilities, garages, and pools or parks. Legal protections are sometimes put in place to protect rental tenants from unwanted condominium conversions. If a building owner desires to convert the building, they must provide adequate notice to tenants of the change and give them the opportunity to buy or move to another rental property. Building owners may use conversions as an exit strategy to cash out the property instead of maintaining rent revenue from the units. If conversion protections are in place, tenants are given the opportunity to purchase their unit before it goes up for sale to outside investors or motivated buyers. Why do buildings go condo
Converting existing buildings — whether they were originally or — into condominiums is a quicker and often more cost-effective way for developers to create housing. It typically takes a developer far less time and money to convert an existing building to condominiums than it does to for purchase. In many places, a condo conversion is also driven by the fact that available land is scarce, and demand for homes far outweighs the supply available on the market. At the same time, in markets across the country, home prices are prohibitively expensive. Converting a building to condominiums may allow developers to create more affordable homebuying options. How does a condo conversion work
Many cities or states have laws in place designed to protect renters during the condo conversion process, though the extent of these protections may vary. A developer typically must get approval from the local municipality for the conversion. In some jurisdictions, tenants may be allowed to vote on whether to “go condo” or not. In others, a certain percentage of the current residents in a building need to agree to buy their apartments before a property can go condo; in New York, for example, it’s of the tenants. Generally, if you rent an apartment and the owner of your building decides to convert the units into individually owned condos, you must be given advance notice of the details surrounding the conversion and transfer of the property to condominiums. If you choose to buy your apartment-turned-condo, you’ll receive in your own name and will be liable for paying on your unit, as most homeowners do — along with mortgage payments (assuming you ). And instead of paying rent each month, you’ll be paying something called common charges. Your monthly common charges, also known as condo fees, go toward paying for the upkeep for the building, its amenities and services — all of which you’ll have part-ownership in. You might on occasion face a , levied at the discretion of the condo association. The condo association, similar to an , is a self-governing body that makes decisions about running of the condominium. It typically consists of condo owners. How do condo conversions affect tenants
Typically, when a rental building is converted to condominiums the existing occupants are given first dibs on purchasing their unit before outside bids or offers are considered. This process, known as the “,” may vary in the finer details by state. Some developers may also offer renters a discounted purchase price for the unit in order to make a sale more quickly. Not all tenants can afford to purchase their unit, or even want to purchase their units. In such cases this renter will often need to find a new residence, though in some municipalities, developers are forbidden to evict renters or must meet certain conditions before they do so. Condo conversions can make finding affordable rentals in a community even more challenging, though the building owner may provide . What are the pros and cons of condo conversions
Condo conversions have both benefits and drawbacks to consider. Here are some of the impacts of this type of development. Advantages
Condominium conversions give renters an opportunity for , often at a fairly affordable price. Insiders’ prices are often lower than open-market rates for . Condominium conversions offer a low-maintenance approach to homeownership. The building and its common spaces are typically managed by a condo owners association. Tenants can participate in building management by joining the condo association. Renters in buildings being converted to condos may be more inclined to purchase their own unit right away, which means less work for the building owner to market and sell units. Disadvantages
Condo conversions may displace rental tenants. The purchase price for units may be beyond tenants’ means, or may not be a good deal based on other available housing opportunities. Building management and upkeep may decline (due to inept/inexperienced condo association). Too many condo conversions in a community can disrupt local . SHARE: Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation's leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Related Articles