Apartment to Condo; Now Back to Apartment

N.P. from Illinois writes:

Dear Mister Condo,

We bought a condo in 2010 in a large apartment complex that was going condo right when the recession hit. It was an investment and we rent it out. Not many condos were sold, the prices never dropped in the recession. Even now many (not sure how many) of the units are still rented out by the developer. Now we have received a letter saying that the developer wants to buy back our unit and NOT be a condo development. The letter is friendly, and says nothing about what happens if we don’t want to sell. We’ve had one tenant in there this entire time (with different roommates) and been very happy with this investment. Do you know what the laws are regarding this situation?

Mister Condo replies:

N.P., dissolution of condominiums varies from state to state. Just as when the project filed to become a condo, a new filing will be made to dissolve it. I am not familiar with the specifics of Illinois law regarding the dissolution of a condo but I imagine it is similar to other states. Typically, unless court ordered (which happens when an association fails or defaults), a petitioner sends in the required paperwork to dissolve the association. There is usually a majority or full 100% agreement required by all with an interest in the association. That can include mortgage holders as well as unit owners. This is a very legal action and you will most certainly wish to hire an attorney to guide you.

I found this link on dissolution of non-profit corporations in your state to be of use: http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=080501050HArt%2E+12&ActID=2280&ChapterID=65&SeqStart=10900000&SeqEnd=12900000

I can see where the developer wants to stop the bleeding and the polite letter was likely an opening attempt to gauge your interest. The reality is that if there are many unsold units in the condo, it may fail due to lack of funds from common fees to pay expenses. If that happens, you could see a creditor sue the association and have a judge dissolve the association or put it in receivership. You don’t want that as that could be quite costly for all involved. If the developer wants to convert back to apartments, you should look into how best to protect your investment. It is likely that a smooth transition could actually help you out in the long run. Good luck!

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