On June 28, tenants of the 217 units at 345 W. Fullerton Pkwy. received an oversized binder headed ”Property Report.” Accompanying the slew of official-looking documents was an ominously titled two-page memo spelling out owner/developer Sudler Marling Inc.`s ”Notice of Intent” for the building.
After two paragraphs of legal mumbo jumbo, the memo spit out the real news: ”This letter will formally notify you that the Developer intends to submit the Property to the Act by recording a Declaration of Condominium Ownership on a date no less than one hundred twenty (120) days and no later than one (1) year after the date of this Notice of Intent.”
Like it or not, 345 W. Fullerton Pkwy. was going condo, with extensive renovations costing more than $3 million. Tenants would have to make a decision. Simply put, should they stay-and buy-or should they go?
Simple decision No. 1: Stay.
For residents Kenneth and Mary Ann Rose, the decision to stay was an easy one. Having rented a two-bedroom unit in the building for 17 years, the Roses had grown quite attached to their ”nest” and were impressed with the renovation job Sudler Marling was directing. And since both of the Roses work, qualifying for a mortgage was within their means. ”It just seems like the right thing to do at the right time,” says Mary Ann.
Simple decision No. 2: Go.
Similarly, tenant James Mohn`s decision to leave the Harry Weese-designed building after three years as a renter was simple. Mohn, himself an architect, appreciated the building`s visually interesting exterior as well as his own two-bedroom unit`s functional layout-individual bedrooms and bathrooms matched on opposite sides of the apartment-which made it a ”great roommate apartment.”
For Mohn, however, his unit`s selling price would have left him with monthly payments approximately 35 percent higher than his current rent, and the personally unappealing thought of becoming an owner in a high-rise building led him to his decision to move out. ”For me, the building has been a terrific rental building, but it`s not a building I`d consider buying a condo in at this point in time,” he says.
Easy does it?
When a building goes condo, is it always so simple a decision as the Roses and Mohn make it out to be? It can be, provided you`re ready to do a bit of soul searching, some financial assessment and some good, old-fashioned poking around-not necessarily in that order.
There will be numerous questions to ask of yourself and others, questions like how do you know if you can qualify to buy into the property? And even if you can, how are you supposed to determine whether it`s a good buy?
But before you ask any of those questions, you might stop to think,
”What are my rights?”
The Illinois Condominium Act requires that landlords give tenants at least 120 days` notice of their intent to convert the building. The notice must also give tenants the first right to buy their units, which tenants can exercise within 30 days, and a report on the property that includes prices and other pertinent information.
If your lease expires within the 120-day period, you have the right to ask for a lease extension of 120 days from the date it expires at the same rent, provided you give the landlord notice-written notice, to be safe-within 30 days of receiving the intent to convert notice.
Under the Illinois Condominium Act, landlords cannot enforce any lease clauses or provisions that attempt to nullify those requirements. Chicago`s Condominium Ordinance provides additional protection for elderly or handicapped people, who are entitled to extend their tenancy for 180 days.
Most landlords follow the legalities of notification to the letter of the law because they would jeopardize the project by not doing so, according to Tim Carpenter of the Metropolitan Tenants Organization.
Figuring affordability
Armed with the peace of mind that you`ve got about four months to make your decision, the next question to ask may make that choice easier: ”Will I qualify for a mortgage to buy the condo?”
Talk to the developer`s finance person-many will line up a lender for the entire project to streamline the process-or check with your own financial institution.
If you do qualify, you can move on to the next step of trying to determine whether or not you actually do want to buy.
”If you can live there for approximately what you`re paying in rent, grab it,” says Connie Abels, owner of Abels Realty Chicago Moves, 7015 N. Sheridan Rd. Abels notes that developers often grant tenants a price break-sometimes as much as 10 percent off the asking price-because the developers often can save on brokers` fees and marketing and decorating costs by selling to a tenant.
And the sooner a tenant makes the decision to stay or go, the better the price and terms he or she is likely to secure. At 345 W. Fullerton, tenants who committed to buy within the first 30-day period received, on average, an 8 percent discount; after that the discount dropped to about 6 percent, according to Cliff Drozda, director of project marketing for Sudler Marling.
By the same token, some building owners will buy out all or part of the lease of a tenant who`s willing to pack up and get out early.
Quick work
If making a decision to buy within 30 days seems like a pressure cooker situation, it`s not just because the developer is trying to make a quick sale (though he certainly won`t mind the early commitment).
”We`re not trying to get tenants to make a snap decision and either buy or move out quickly,” says Drozda, ”but the process has to move forward.”
Drozda also notes that buying a condominium in a neighborhood like Lincoln Park or Streeterville has its particular benefit in terms of fixing a purchaser`s monthly costs, as opposed to playing the rental gamble, which could, and often does, yield 10 percent increases annually.
Buyer versus renter philosophies aside, how do you know if the building is a good one to buy into?
You can begin by evaluating the developer. Take a look at other properties and conversions the developer has done and find out how that property has turned out, advises James L. Prange, president of Renaissance Properties, which is involved in eight condominium conversions on Chicago`s North Side.
”It`s easy to sit down with another person and say, `Here`s what we`re going to do in terms of renovation or changes,` ” says Prange. ”We tell our buyers to take a look at other (conversions) we`ve done in the area to get a feeling for the quality of the work we`ve done.”
And while you`re looking, note how many owners the building has versus renters. Will the building you`re considering buying into be entirely condominiums or will the current owner of the building be renting out units?
Values of condo units in buildings with rental units are often lower than those that are strictly condo, according to experts.
At 345 W. Fullerton, the building will be strictly condominiums. And for buyers concerned that the conversion might not succeed, the purchase contract stipulates that if the building isn`t 50 percent sold by the end of the calendar year, prospective buyers have the option to either postpone their closing or proceed no further.
Another important consideration is whether the property will be approved by the Federal Housing Administration, which allows for minimal down payments, says attorney Dean Carris of the firm Carris and Krasnik. He also notes that the FHA approval is a plus when the buyer wants to sell the unit later on.
If you are satisfied with what you`ve found to this point, and are seriously considering purchasing your unit, it`s time to sit down for a question-and-answer session about the property.
”You`ve got to find out everything you can about the things in the building you didn`t care about as a renter,” says Abels, reeling off a list of items to check into, such as the roof, the plumbing and the boiler.
You can find much of the additional information you`ll need either through the person marketing the condominiums or in the property report. The property report-a requirement of the Illinois Condominium Act-will provide much of the information, though some of it can be lost in the translation from legal jargon to laymen`s English.
Hiring an attorney to get you from this point to closing might be the most prudent approach. For about $350, an attorney should be able to help you review the property report and take you to closing on a simple condominium conversion.
Among the things to check, according to Carris: Does the property have proper insurance? Are there any liens or lawsuits against the property? Is the developer current on bills to contractors?
Carris also recommends comparing the condominium`s proposed declarations and bylaws to those of similar buildings in the area, and making sure the favorable conditions are also included in your property`s version.
Finally, a word to the wise. If you`re hiring an attorney to help you wade through the process that will take you from renter to owner, hire one who knows the market area where you`re looking to purchase and is well-versed in real estate law. Period.
”Unless he knows the ins and outs of real estate law, you should not go to a family friend-it`s no bargain,” stresses Abels. ”You need someone who understands Chicago real estate.”
