Curious about condo conversions

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Submitted by OwnerOfCalifornia on September 8, 2006 - 1:50pm

Hey all. I am curious about the process of condo conversions and hope some of you may have some insights. I am referring to the large apartment complexes (with hundreds of units) that convert to condos.

1) How prevalent are conversions still happening today, as opposed to one or two years ago? Given current market conditions, I would have expected new conversion projects to stop almost completely, but I know of at least one project in the Rancho Penasquitos area that may convert next year.

2) If you have a lease with nine months remaining, and you receive a six month notice of the “conversion date”, are you allowed to finish off your remaining nine months, or are you required to move out in six months? Conversely, if you have three months remaining, can you renew for the final three months, or even another full year lease (the standard term for the large corporate complexes) which you will be allowed to serve out?

3) What are some notable differences in the build specs for a new condo development vs. a development built as a large multi-family rental? What specs do “condo-converter” developers have to adhere to when making the transition? Is it equivalent to new condo developments, or are the developers not required to bring the conversion “up to spec”?

Thanks for any insight you can provide on any of the above three topics.

Submitted by AN on September 8, 2006 - 3:47pm.

Here's my attempt at answering all of house questions.
1. I think it's not as prevalent now as it was 1-2 years ago. Now, there's even talk about reverting the conversion back to apartment.

2. I was leasing last year when the complex told everyone they're converting. They usually do it in phases. We had about 6-8 months left on our contracts and they told us that we can finish our lease. After that, we can stay on month to month. So until they find buyers for your unit, they would not be converting it and kicking you out. That would be too costly for them to have units stay empty.

3. I don't know exactly what's the differences but at least condos supposed to have much better insulation and walls supposed to be a certain thickness between residences.

Submitted by Carlsbadliving on September 8, 2006 - 3:55pm.

I can add to question 3:

It all depends on the City regulations. Most cities have different regs for apartments and condos. Carlsbad for instance requires additional parking, more recreation space, extra storage, etc for condo units. They associate a higher standard of living with the condo vs. the apartment. So when it comes time to convert, the builder would have to upgrade all the amenities, which is some cases isn't possible (not enough room for parking, extra storage, etc.). By doing this Carlsbad has been able to prevent the mass conversions. As far as I know there have been only several small (handful of units) conversions in Carlsbad.

Other cities, including San Diego have much less restrictions on the conversions. A simple facelift and airspace subdivision and you're done. This led to WAY too many conversions in San Diego. You might have read that recently San Diego has considered tightening their regulations and even had a lawsuit over whether an environmental review was necessary for the conversion.

Submitted by Larry J. on September 8, 2006 - 4:19pm.

Condo conversions, it seems to my simplistic mind, are nothing more that property FLIPS done on a large scale.

Short of having a project owner who has a ton of equity and sees the "conversion" as a way to achieve the highest final return it seems likely that conversions will cool with any real estate slowdown.

Submitted by Carlsbadliving on September 8, 2006 - 4:26pm.

The conversions will absolutely cool. They already have, with many proposed conversions being turned back into rentals.

Submitted by 4plexowner on September 8, 2006 - 9:40pm.

I converted two four-unit properties to condos.

Sold the first one prior to completion of conversion process because I was running into issues with the city. Buyer completed the process but it took him another 11 months.

Completed the second conversion last year.

City recently changed condo conversion requirements. If I understand correctly, condo conversions will now have to meet the same parking requirements as new construction. Prior to this change, whatever parking a property had was acceptable.

I think this parking change essentially stops condo conversions in the future (very few multi-unit properties have enough parking to meet today's codes) but doesn't apply to projects that are already in the pipeline.

There are numerous notices that the converter is supposed to serve on the tenants. The six month notice is one of the first ones.

The converters are hoping that you will move out on your own volition. My advice is to play hardball - don't be an a-hole about it, but don't just rollover and move out. You have rights as a tenant. Current rules require the converter to compensate you financially for forcing you to move.

Check this link for tenant info: http://www.tenantslegalcenter.com/html/c...

There are no specs for condo conversions believe it or not.

The conversion process is strictly a legal / paperwork process with the city. Most converters upgrade the property while the paperwork is being processed but this is not required. And the upgrades are all cosmetic - no converter is going to upgrade wiring, plumbing, insulation, etc if they don't have to. I chose to have insulation blown into the walls and ceilings of my units because I had lived in one of the downstairs units so I knew that noise was an issue.

Personal opinion: condos are the lowest rung of the real estate ladder (OK, mobile homes are one rung down from condos) and condo conversions are on an even lower rung if that is possible - don't buy condos for the next few years and certainly don't buy a condo conversion

Submitted by OwnerOfCalifornia on September 10, 2006 - 8:03am.

Thanks everyone for your comments. Much appreciated.

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