If you have read the real estate wires over the last few years, it would not be a shock to you that deconversions have been popping up all over Chicagoland. What is a deconversion? How do deconversions work? What does it mean for an association and its members? How can the association gear itself up for a deconversion? This article will walk you through the 

What is a Deconversion? A deconversion is the process that ends the condominium structure of ownership. Over the last forty years, it was not unusual for an apartment building to be converted into condominiums whereby an association was created and the individual apartments were sold to purchasers. In a deconversion, that process is reversed and the condominium is generally reverted back to an apartment if it is not knocked down and replaced. The deconversion officially occurs, when the property is removed from the Condominium Property Act pursuant to Section 16 of the Act.

How Does a Deconversion Work? In order for a condominium association to be deconverted, one hundred percent of the owners and all of the holders of liens on the property must approve the deconversion. Realistically, this will only occur where the association is owned by one unit owner and the properties within the association are only subject to one mortgage. This is accomplished by selling the property to a single purchaser in accordance with Section 15 of the Act. That Section requires the approval of the ownership (not the mortgagees) for the sale to happen. It takes the approval of a majority in a two unit association, 66 and 2/3% of a three unit association and 75% of an association that is four units or greater, unless the declaration or by-laws require a higher amount. Assuming that the required number of members approve the sale, all of the owners are obligated to execute those items needed to make the closing happen. An owner should receive the unit’s portion of the available purchase price based on its percentage of ownership interest in the common

elements, minus amounts owed to the association and minus closing costs related to the sale. However, the available purchase price is subject to change to accommodate objectors.

If an owner votes against the sale and files a written objection to it within twenty days of the date it was approved at a meeting of the membership, the owner is considered an objector to the sale. Objectors are able to get the greater of 1) the value of the unit based on a fair appraisal minus amounts owed to the association or 2) the outstanding balance of legitimate liens recorded against the property or for which the unit has been given as collateral minus amounts owed to the association. If the unit is underwater on its mortgage (there is more owed than the property is worth), then option 2 will be used. If it is not underwater, option 1 will be used. Since either of these options can and should result in a higher valuation than the unit’s share of the common elements would generally entitle the owner from the sale, it reduces the available price for all other owners. The objecting owner is also entitled to receive reasonable relocation costs based on the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, the amendments thereto and the rules implementing the Act.

The biggest issue in the deconversion process revolves around the appraised value of an objector’s property. If there is a dispute over the value of the objector’s unit, it triggers an appraisal process. The owner and the buyer each select an appraiser, who are paid by the selecting party. The two appraisers then select a third appraiser, whose costs are usually • 847.301.7505 | 11

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