Laws on Converting Apartments to Condos

Landlords who rent multi-family dwellings to residential tenants often convert their units to condominiums. Often, this action is performed as a way of disposing of the rental property. This transition creates individual properties that may be purchased, rather than rented, by individual owners. However, there are numerous legal and compliance issues that an apartment building owner must comply with before an apartment can be sold as a condominium.

Most states require property owners to apply for a condo conversion permit or license. These permits are issued by a specific department within the state government, such as the "Department of Community Affairs" or "Department of Urban Development." Most counties and major cities also have their own separate permits that a property owner must obtain before moving forward with a condo conversion. Therefore, property owners may be required to obtain up to three separate approvals from their state, county and city government before moving forward.

Once a condo conversion is approved by the necessary governmental departments, the owner of the property must record a deed for each approved condo unit with the county in which the property is located. This action creates a record of the current status of the property and identifies the present owner. Once the condo unit is sold to a potential buyer, a new deed will need to be recorded to create a record of the conveyance.

In many cases, an apartment complex will have renters occupying apartments prior to the condo conversion. In such cases, many states and cities require the landlord to provide tenants with notice that the apartment is going to be converted. Required notice provisions typically range from 60 to 120 days. Some states also maintain laws that require the landlord to offer a first right of refusal or the opportunity to purchase the condo before it is advertised to other potential buyers.

In some major cities, such as Los Angeles, there is a shortage of afforable rental housing options for low-income residents. In an effort to remedy the consequences of a condo conversion on low-income residents who may not be able to purchase their apartment unit once it is converted to a condo, some cities require the landlord to offer relocation assistance to tenants. This assistance is usually based upon the tenant's income and other guidelines set by local and state governments.