Questions to Ask Your Next Landlord About Condo Deconversion

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Chicago has a finite amount of land where it’s legal to build apartment buildings. Not every area is zoned for housing, and only some of those residential zones allow housing structures with large numbers of units inside. Multi-unit buildings can be managed in one of three ways. Apartments are owned and managed by a single person or company, and occupants pay rent to that owner. Condominiums are individually owned, but the shell of the building is collaboratively maintained by the condominium association through dues collected from each owner. Cooperatives are owned collectively by all of the occupants together, who then are assigned sections of the building to live in. Chicago’s many multi-family buildings have shifted between all three over their existence. Some buildings such as Aqua are separated into two entities, with some floors run as apartments and others as condos.

Swapping from one management style to another is a pretty complicated process, as you can probably imagine, but when compared with constructing a brand new building it’s usually a much cheaper and less obnoxious process.

In Chicago before 2004, most condominium buildings were newer high rise structures while the older walk-up buildings were mostly apartments. (Chicago has never really been a big location for cooperatives.) But in 2004 the banks were making mortgages available to people who would previously have been considered as too risky for loans. Most of these “sub prime” loans offered far lower premiums than comparable rent rates, but they weren’t enough money to afford single family houses. The demand for condos exceeded the demand for apartments, so landlords started converting their apartment buildings to condos and selling them off individually.

The problems started cropping up about 3 years later. Many of the sub prime loans were “adjustable rate” mortgages, which start off with very low payments and then adjust to much higher rates after the first 1 or 3 years. Others were “balloon” loans, which required payment of the entire balance of the loan after an introductory period. Borrowers who lived in these condos were unable to cover the higher payments and went into foreclosure. This spurred the housing crash of 2007-2010. Troubled owners started renting out their condos to avoid foreclosure. Condominium associations stuck with lots of foreclosed units would sometimes rent those out themselves. Condo buildings were starting to slide back towards rentals. As larger condo communities became dominated by rentals, they had trouble selling the remaining units to normal buyers. Mortgage lenders won’t underwrite loans in buildings which are not mostly owner-occupied. The associations were in trouble.

The other problem started popping up around 2014. The original pre-2004 condominium buildings were mostly large steel skyscrapers along the lakefront that were too large for self-management. Professional third party property managers were necessary. The 2004-2006 era of conversions were older, smaller buildings and they were largely self-managed by the condo owners working together. Most of these owners had no idea of the maintenance necessary to keep a century old building on its feet. Most of them need major repairs to things like the brickwork, the roof or the windows every 10-20 years. Self-managed associations were self-managed because it was the cheaper option. They did no preventive maintenance. They didn’t set aside extra assessments for capital improvement projects. By 2014 these buildings were starting to fall apart and the associations had no money to fix things.

For about 10 years following the subprime mortgage crisis money had been largely unavailable for large scale building purchases. But by 2014 the lending market was starting to recover and landlords were able to get money to fund new projects. They had plenty of ways they could spent that money. They could invest in the remaining apartment buildings that never went condo. They could tear down old buildings and construct new ones, a process that was pretty complicated in Chicago. They needed zoning variances, permits, and to follow the city’s increasing number of affordable housing requirements. Or they could buy a struggling condominium association and “deconvert” it back into apartments.

It is no big surprise that by 2016 we start to see news articles pop up about condo deconversions. These days they are very common. In order for a landlord to deconvert a condo association they must get approval from a majority of the existing owners. If the condo association’s bylaws don’t specify a percentage, it defaults to 75%. There are some politicians who are pushing to make that 85%. If 75% of the owners agree to deconvert, any dissenters will be forced to sell their homes to the incoming landlord anyhow. They have no choice in the matter. They may not be forced to move out. The landlord may lease their old condos back to them after the transfer. But they may take a huge loss on the sale of the property compared to whatever they paid for it originally, and they lose the ability to say that they are homeowners.

So, seven paragraphs in, we finally get past the sordid history and into some advice for renters. All that history was sort of necessary though, because for renters who move into these deconverted buildings unaware they may wind up with a very hostile living situation. Renting in the current deconversion climate adds a whole new branch to the questions that renters should ask before signing a lease.

  1. Is this a deconversion? If the answer to this question is “no” then you can skip the rest of this article. If the answer is “I don’t know,” escalate the question until you get either a yes or a no. If the answer is “yes,” continue through the rest of the questions on this list. Alternatively, you can contact us and we will check the deed history for you to confirm from the legal side if a deconversion has occurred.
  2. Is the conversion 100% complete? If any vestige of the original condo association still remains then the landlord will have get approval from them before undertaking major repairs. This will add time to what may already be a lengthy process of hiring contractors, obtaining permits and performing the actual repairs.
  3. If it isn’t complete, how long do the remaining owners have to sell their property to you? Most smart landlords force the association to get 100% approval from all residents before deconverting, but sometimes that just isn’t possible. If they go through with the process anyhow, they will allow the remaining owners some time to get their lives in order before selling, but that time will not be infinite. If you’re renting in a new deconversion it may take a year or so before the building exits the hybrid condo/apartment stage permanently.
  4. How many of the units are still occupied by former owners? A deconversion does not mean that the old owners have to move out. They can lease back their old condos, now in apartment form. But these owners might have a long history with the building. They might be former association board members, accustomed making changes to the building on their own. They might have been through some pretty dark times to keep the building running over the past decade. They may have taken out second mortgages on their condos, only to lose all of their equity in the deconversion. Given that many condo owners have taken a strong anti-renter stance for years in response to mortgage lending standards or basic class bias, they may be extremely resentful that you’re sharing a building with them.
  5. What capital improvements have you done since the deconversion? It’s a safe bet that any deconversion had a lot of structural problems and deferred maintenance issues when it sold. Struggling associations will often let small problems turn into big problems while they try to put together the money to fix things. Any landlord who takes on a deconversion will probably have to shell out a lot of cash immediately after to fix all of these problems the right way. Renters who are moving into deconversions will want to know that most of these repairs have already been completed. If they haven’t been, expect to live through the replacement of the roof, windows, tuck pointing, gutters, downspouts and fascia.
  6. Is this building made from split-face block, and if so, do you have someone who knows how to deal with it? The condo craze of the early 2000s wasn’t restricted to vintage apartment buildings. Many new condo buildings went up as well, and many of these were made from a material called “split face block.” This was a cheap stone material that unskilled laborers could use without much training and certainly without licensing. It looks like normal brick, but it deteriorates rapidly in Chicago’s cold, damp weather, leading to major water leaks through the walls. Landlords who deconvert split-face block buildings must know how to deal with its quirks.
  7. If the deconversion is not complete, can I see a copy of the old association’s bylaws? An incomplete deconversion is a building with two masters: the new landlord and the old association. Remaining owners retain a say in what happens to the building until they sell their units. But they are bound by the original bylaws of the condo association. If the old association is still hanging around, you should get a copy of their bylaws. You won’t be bound by them, but it’s good to know what rules your neighbors have to follow.

Before we wrap up this list I wanted to take one moment to address those renters who might already be renting in condo buildings that are now getting ready to deconvert. For you guys the only thing that is going to change is your landlord. You don’t have to move. The condo owner who rented the unit out to you will have to sell the unit to the new landlord, but your lease will continue. You will get instructions on a new address for your rent checks, and a new contact number for maintenance requests. That’s all. Your lease runs with the building, not with the owner, just like any other renter in apartment building that gets sold.


Have you rented a deconverted condo? Are you a former condo owner who went through a deconversion? Let us know about your experiences in the comments!

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Kay Cleaves

Founder and owner of RentConfident. She's the primary developer of the website and research engine code. She's spent over 10 years working in the Chicago rental industry and has assisted with over 1200 leases.