"De-condominiumizing" the Building to make it a single dwelling again

Attorney Elliott Topkins
of Topkins and Bevans has shared some great advice with me and thought I should pass along to you.  Read his blog @ RealtorResourceBlog.com

Converting a Building to  “non-condominium” status may be
Beneficial in the correct circumstances.

My clients have been recently facing a dilemma. Should they raise their three small daughters in the South End of Boston, or should they make the "trek" to the suburbs, A common question facing many urban couples. There were "pulls" and "tugs" on both sides. They loved the urban life; they have the financial wherewithal to absorb the cost of private school, which, unfortunately, is almost always dictated by the general malaise in the Boston City schools system. They lived in the first two floors of an upscale brownstone condominium; floors three and floor were occupied by single people with whom my clients had little in common.

After much soul-searching, my clients decided to make a run at staying in Boston, but only upon the condition that they could de-convert the Building they live in from a Condominium to a single family residential dwelling. The challenges were great. They needed first to acquire the other two Units. Those acquisitions were effected late in 2010, with the third floor being a purchase from an absentee landlord, and the fourth flood being a purchase from a resident owner, who had fallen far behind on his mortgage payments.

By the end of 2010, my client owned all three Units. We are now in the process of "De-condominiumizing" the Building. In our case, this involves filing a document with the local Registry of Deeds which indicates at least 75% of the people owning Units in the condominium wish to change the status of the Building. There is a small filing fee. We are in the process of obtaining the consent of my client's Mortgagee to the transaction, which is required if the conversion from condominium to single family dwelling is to be effective. Given the difficulty most of us are having with dealing with Lenders these days, obtaining this consent [although the mortgage loan represents less than 25% of the combined value of the Units, may be the most difficult task facing us] is required if the conversion is to be legally effective.

There are financial "pros" and "cons" involved in taking the steps outlined above.

The positive aspects include a different kind of more gracious living and privacy, which condominium living does not allow. There will probably be a strong case for a tax reduction for the Building, since,  in general, three Condominium Units would probably have more value than one Townhouse. The other "positive" is that my clients can now achieve "husband and wife, tenants by the entirety" status for the entire building, whereas before the conversion only the Unit they actually owned, and resided in, was afforded that status. On the negative side, there is the expense of the transaction, coupled with the relatively higher difficulty in marketing a multi-million dollar Townhouse as compared to three "lower-value" Condominiums. The ultimate value of the single family dwelling, moreover, will probably be lower than the three component units. Lastly, on the negative side, once the Building is no longer a Condominium, there may be restrictions on converting it to same in the future based upon statutory or zoning changes, or new local and state restrictions or moratoriums.

Those of you who are interested in investing multi-family rental property may also have need to “de-condominiumize”. If you acquire condominium units in a building with no Trustees, or no reserves, it may be in your interest to remove the Building from condominium status. As long as you control enough units, that process can be completed using the same criteria as set forth above, and the Building can revert to multi-occupant dwelling status. There may need to be some “housekeeping” with regard to tax, water and other liens, but at least the investor can “stop the bleeding” and make the Building viable from a financial point of view.

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Attorney Topkins brings up a good point in the last paragraph as a professional Realtor, I see homes all the time that are typically the handyman or fixerupper category. These properties often times have no known condo association which detracts from their marketability. However, if you had the option of purchasing the two condos at a good price, you reverse the property from a condo to a single owner dwelling again. For a list of fixer uppers, you could request that by making contact with me @ http://www.schedulewithmike.com

Thanks to Eliott Topkins for such a well written article.