By Deborah Goonan, Independent American Communities
A controversy brewing in Chicago provides more evidence that the market for association-governed housing is on the decline, especially condominiums.
River Trails Condominium, 16 buildings 360 units, located in Prospect Heights, Illinois, is one of the latest multifamily housing communities that real estate developers covet for a deconversion.
A deconversion is the process of undoing a condominium association and converting the entire community to rental apartments under one owner.
The Daily Herald reports that real estate developers have their eye on Prospect Heights multifamily property because demand for rental apartments is high, while demand for “affordable” condo purchases remains very low, even a decade following the most recent economic recession.
River Trails meets all of the typical criteria for a good deconversion candidate: Constructed in the 1970s, dated architecture with aging infrastructure, many units selling for less than $100,000, with a location that is well-suited for apartments.
More than half of the units are rented by tenants, and currently owned by small real estate investors or reluctant landlords – owners who have moved on, but have been unable to sell their condos. While landlord owners are eager to sell their units to an apartment developer, most owner occupants are fighting for the right to keep their homes.
The current board of directors is in favor of selling the association for a deconversion. They argue that current owners who wish to stay put would receive market value for their units, and, if they wish, could then rent their current units from the new owner.
Owner occupants say they prefer to own property, but they would not be able to afford to buy another home with the money they would receive from a deconversion sale – reportedly, $90,800 – $127,000, depending on the number of bedrooms.
It is not really a surprise that the board is in favor of putting River Trails up for sale to the highest bidder. The board is very likely controlled by investor-owners who rent their condo units.
In association-governed communities, individual owners or residents are not limited to one vote per person. Votes in a condo corporation are tied to the number and size of condo units owned, and, in River Trails, it is apparent that investor-owned votes outnumber owner-occupant votes.
Investor owners need not reside at River Trails to cast their votes for board elections, amendments to governing documents, budget issues requiring a vote of members, or even the decision to sell the community to a buyer interested in deconversion.
In Illinois, a 75% voting interest in a condominium association is needed to approve a sale of the entire property, making a deconversion possible. Once a sale is approved, owners of the remaining 25% of condo units are legally obligated to sell their units, even if they would prefer not to do so.
River Trails condo owners who do not want to sell their homes are fighting back. A few months ago, they organized a board recall attempt. Owners thought they voted out the board members intent on forcing a sale and deconversion. Owners say they followed the bylaws: they obtained a quorum (20% of all unit owners) at a recall meeting, and then at least two-thirds of owners present at the meeting voted to oust their current board.
However, the board has not accepted the results of the recall meeting. They continue to move forward with their plans. The board argues that owners were unsuccessful in their recall attempt. The condo board’s attorney insists that two-thirds of all unit owners must vote for a recall.
Left with no other option to defend their rights, in late August, condo owners opposing the sale and deconversion of River Trails filed a lawsuit against their Association. The homeowners’ attorney claims that the condo board is not following bylaws for River Trails Condo Association.
Will the condo owners opposed to deconversion be able to prevent an unwanted sale?
Will the legal system protect the private property rights of owner-occupants and others opposed to a sale?
Or will investors succeed in completing a hostile corporate takeover of River Trails Condominium Association?
Prospect Heights homeowners sue to block condo deconversion
Chacour Koop, Dailly Herald
updated: 9/15/2017 10:52 AM
Condominium owners in Prospect Heights are suing to block their homes from being converted into apartments.
Board members of the River Trails Condominium Association want sell the 16-building, 360-unit complex to developers interested in deconverting the condos located south of Palatine Road and west of Milwaukee Avenue. But homeowners, who say they weren’t consulted about the plan, have been fighting the sale since May.
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See also – previous article:
Prospect Heights residents protest plans to convert condos to apartments
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