In the five years since developers started buying up whole condo buildings intent on switching them to apartments, some owners opposed to selling have complained about a kind of “tyranny of the majority,” where everyone is required to sell if three-quarters of a building ownership votes in favor of it.
Under existing Illinois law, 75 percent of ownership in a condo association must vote in favor for a bulk sale to go through. In Chicago that would go up to 85 percent under the ordinance Alds. Brendan Reilly (42nd) and Harry Osterman (48th) proposed this week to the City Council’s Committee on Housing & Real Estate. (The 75 percent is based on unit size, not number of owners.)
Being forced to sell one’s home simply because most of the neighbors want to sell theirs “sucks,” said Robert Olsen. He opposed the sale of all 448 condos in the South Loop’s River City through three votes over 20 months. “It doesn’t make sense for our property rights to be subject to our neighbors’ opinions.”
On the third go-round, in September 2018, 78 percent of River City’s ownership voted to approve the sale, and the $90.5 million deal closed in December. Olsen and his family are renting in the building for now under an agreement offered by the buyer, Marc Realty Capital.
Elmore’s firm has worked on 36 bulk sales since 2015, totaling 3,500 units, she said. She wrote that “above-market purchase prices as well as potential other benefits such as payment in full of underwater mortgages for struggling unit owners” sometimes don’t impress unit owners who prefer to stay put. Olsen said while opposing the River City sale a few years ago that he and his husband wouldn’t be able to afford to buy again in the South Loop on their proceeds from the bulk sale because River City, built in 1986, was the rare modestly priced pocket in the now-booming neighborhood.
Because the city’s rental market is hotter than the for-sale market, in the past five years developers have been buying condos in bulk in neighborhoods like Lakeview, Lincoln Park and the Gold Coast to make them over as rentals. Their appetite shows little sign of going away soon, Elmore wrote. As a result, “it’s unclear whether any increase in the threshold percentage needed to approve a sale would lessen the interest” or would ”simply make it more difficult for owners who wish to take advantage of the benefits of these transactions,” she wrote.
Another attorney, Craig Capilla, said raising the bar for a vote to approve a sale might reduce the number of condo associations that try to go the bulk-sale route. Several deconversion votes “have barely slid over the 75-percent mark,” said Capilla, an attorney at Franklin Law Group in Northfield. Raise the figure to 85 percent, Capilla said, and “I would anticipate that it would discourage people from event attempting, because they would not expect to be able to get to that vote percentage.”