A condominium conversion happens when a property of multiple living units goes from being held by one title owner to multiple title owners. Usually, the main purpose of such a transition is to take the property from being an income property to an owner-occupied residential property. Condominium conversions took place rapidly during a time period from approximately 2003 to 2006.
During that part of the decade, the market was very conducive to a number of condominium conversion events. In fact, the practice was so prevalent that the condo conversion rate broke all sorts of records during that time period. When a condominium conversion takes place, there are a number of things that need to happen that often take a substantial amount of time.
Those who are renting units in the property may be given a certain amount of time to move. Some may be allowed to stay until their lease contract expires. In some cases, the condominium conversion laws in a state may mean the tenants are offered relocation assistance by either the previous owner or the new owner. The laws outlining condominium conversion guidelines differ for each individual jurisdiction. In some cases, a jurisdiction requires condominium conversion forms to be filled out.
In order for a wide-scale condominium conversion event to take place, conditions must be just right. One of those conditions is that interest rates must be low enough that they will entice people who would otherwise rent into buying. Also, the population must plan on remaining relatively stable. Therefore, those potential buyers must perceive the economy as being sufficiently strong.
A condominium conversion has a number of different effects on the local area in which it happens. First, if many properties are involved, it could put a squeeze on the rental property market, meaning fewer rentals would be available for those who are not in a position to buy. Also, a condominium conversion will likely force some people to make an unplanned move.
However, in some cases, enough former renters will be enticed into buying that there will be no increase in demand for rental properties, at least not initially. As time goes by, and especially if there are more people moving in than out, the rental market will likely become strained, leading to higher prices. If rent gets so high that people make choices to live elsewhere, a market correction will likely happen.
In many cases, renters may be given the opportunity to retain their units. However, nothing is ever guaranteed. Still, for a new owner looking for a natural buyer, someone already using the unit would seem to be a good place to start. While renters may not always take the option, many may do so.