2012 housing outlook: Chicago vacant condo program - chicagotribune.com
Within the city of Chicago, armed with an almost 2-year-old law, those efforts have moved beyond pen and paper. In such neighborhoods as West Woodlawn, Austin and Rogers Park, areas where condominium foreclosures have left entire buildings empty and created eyesores, the city has taken steps to turn condo units into apartments by selling entire buildings to investors and developers who will rehab them for rental.
The program is the result of amendments to the state's Condominium Property Act that took effect in January 2010. The changes allow a municipality to petition a Circuit Court to allow a receiver to sell the distressed building as a whole. Owners of the units, which typically are lenders, receive a fractional share of the proceeds from a sale after liens are erased. After taking bids, a judge decides who the buyer of the building should be, a decision based not just on price but on the buyer's financial resources, track record and building plans.
This is the first article I've seen on the Distressed Condominium Property Act as it is working out in Chicago. This is an Illinois state statute that allows the city to petition the circuit court to appoint Community Investment Corporation as receiver for a failed condo project. CIC then gets all the banks who own the units together on one page, deconverts the project by dissolving the condo ownership structure and CC&Rs, and then sells the building to an investment group to operate as an apartment building.
To date there are 150 projects somewhere in the deconversion process, out of a total of 250 that CIC has identified as good candidates. About 30 are already under court order for deconversion.
This is an easy way to solve two problems: first, get rid of failed condo projects that are a blight on urban neighborhoods; second, restore the proper level of rental housing that went way out of balance during the subprime insanity.
Now--if we can start doing something about all those unnecessary HOA projects. The Federal Reserve's new white paper on the housing market says, "Reducing some of the barriers to converting foreclosed properties to rental units will help redeploy the existing stock of houses in a more efficient way. Such conversions might also increase lenders’ eventual recoveries on foreclosed and surrendered properties."