Apartment communities today, condos tomorrow

By Deborah Goonan, Independent American Communities

Have you ever considered how the proliferation of Association-Governed residential communities affects members of the public who choose not to live in a common interest community?

Do you think that, as a tenant or an buyer, you can easily avoid dealing with restrictions and rules – not to mention the additional cost of HOA assessments and all of the financial risks that go hand-in-hand with common ownership – by simply not purchasing or renting in a homeowner, condo, or cooperative association?

Think again.

If you lease an apartment today, tomorrow you could become the next displaced resident, thanks to a condo conversion.

The changing face of multifamily housing

Four or five decades ago, multifamily housing in the US was either designed as rental apartments or 2- or 4-plex homes divided into individual apartments. Residents of the apartments were tenants, except for the landlord, and possibly extended family members.

Except for a small number of cooperatives, if you owned property, it was either a detached single family home or a row home attached on one or both sides to a neighboring home.

It was simple. Tenants lived together in the same building, with one landlord-owner.

But in the 1950s and 1960s, condominiums were created by statute – out of thin air- and the lines for use of multifamily housing became blurred.

Today, in a multifamily condominium association, some units will be owner-occupied. But in many cases, the majority of units will be inhabited by tenants. Any given condo building is some combination of a rental community with multiple landlords, plus some apartment owners that reside full-time or seasonally. It varies by community, and the ratios fluctuate over time.

Apartment communities today, condos tomorrow

These days, a multifamily structure can be built as rental apartments, but then several years later, some real estate investors or developers decide they’d like to purchase the building(s) and convert the units to condos for sale. When that happens, it can turn a tenant’s life upside down.

Ask Kelly George of Riverview Terrace, a former senior living facility recently converted to condominiums in 2013 by the owner of the facility, the Roman Catholic Diocese of Wheeling-Charleston. The community has been owned by the Diocese since 1993, and is currently managed by Sacred Heart Riverview Terrace Inc.

Tenants were given the option to purchase their apartments or remain in lifelong leases, so long as they agree to pay monthly maintenance fees, in addition to higher rents to cover tax increases and 24-hour security.

Half of the 26 units have been purchased, and half remain occupied by tenants.

The lawsuits are flying already

However, though the condo association is barely 2 years old, it is now involved in a significant lawsuit. George has retained an attorney, Timothy D. Houston, who claims that his client’s service fees have increased by an whopping 30%.

The lawsuit alleges that those increases include costs for repairs to the building, a cost that is the responsibility of the landlord, not tenants.  Houston argues that repairs are being made in order to sell condos.

While charging increased service fees to defray repair costs may benefit condo owners, it certainly does not benefit tenants, and it violates the terms of their leases.

In addition, the tenants are now expected to abide by the decisions of the condominium association. Houston alleges this is also a breach of contract, as it has fundamentally changed the terms of long-term leases.

This is a case to follow.

And it illustrates that it is becoming increasingly difficult to avoid the adverse effects of 5 decades of housing policy favoring Association-Governed residential communities.

 

More details available in the Charleston Gazette-Mail