A recent change to Florida property law would allow condo owners to convert their properties into rentals.
During the boom years, condos were hot in South Florida, so hot that zealous developers began converting modest apartment buildings into sellable condominiums to get in on the action.
But now, with demand stagnant, distressed condos have become a fixture of South Florida, and some recent alterations to state law, which would allow the condo units to revert back to apartments, may be the solution.
As reported on by the Sun Sentinel, the plan is polarizing, like most housing remedies: “Proponents insist it’s a perfect opportunity for “underwater” borrowers to shed burdensome mortgages, while others describe it as an unfair power play by developers to force people from their homes.”
Jennifer Drake, a lawyer Fort Lauderdale, said the plan returns the properties to their natural state.
“Most people see this as a way out because it should not have been a condo in the first place,” Drake said.
The owners of the condos have two options for unloading their properties. They can offer their condos for a share of the apartment complex or sell the condo for its current market value. What neither option resolves, though, is what owners should do with their lenders. Most of the condos in question are distressed, and as a result, short sales (and the financial forgiveness that accompanies them) may be the only possible reconciliation, according to the Sun Sentinel.
Jonathan Kingsley, a unit owner at a Hollywood condo that operates unofficially as a rental, said that with how much condo values have fallen, the only sensible thing to do is sell.
“You might as well get out now at whatever loss you can,” he said.
Not all condo owners, though, share that mindset. Julio Robaina, for instance, a former state lawmaker, sees the conversion strategy as unfair to investors.
“I think it’s greatly unfair if you bought with long-term plans because you’re being chased out of your investment without any say, basically,” Robaina said.
William Bush, a former board president in Weston, said that converting condos to rentals defeats the entire purpose of a condo.
“I don’t want to live in a rental community; that’s why I bought a condo,” Bush said. “I think people would be dead-set against it.”
As the Sun Sentinel notes, state law does stipulate that a condo-to-apartment conversion can be halted if 10 percent of the building’s owners object.
But regardless of attitudes or emotions, money should conqueror all, said Grant Stern, president of Morningside Mortgage Corp.
“This is the time to cut the best deal you can,” Stern said. “Once all these distressed properties are cleared, banks aren’t going to want to negotiate these things.”