Condominium Conversion
A condominium conversion is the change in title from a “single owner” of an entire project or building to “multiple owners” of individual units. Only 2-6 unit properties may convert. They qualify only when they (i) meet occupancy requirements, (ii) win or bypass the conversion lottery, and (iii) for lottery conversions, satisfy “tenant rights” rules.
How can I bypass the condominium conversion lottery?
The only exemption from the condominium conversion lottery is a building with two units. They have a clean eviction history, and have both units occupied for a year by separate, unmarried individuals who each own a minimum of 25% interest in the property during the entire occupancy period. Occupancy is proven by a sworn statement and vacant apartment do not count as owner-occupied. Two unit buildings from which an elderly, disabled or catastrophically ill tenant was evicted after November 16, 2004, for reasons unrelated to the tenant’s behavior, are not eligible to participate in the lottery selection process.
How does the condo conversion lottery work?
Each year the lottery is held during the first quarter of the calendar year. Ticket are $250 and available for a two month period, and each ending two weeks prior to the drawing. 200 units, not buildings may be converted, which usually works out to approximately 55 buildings. The longer the buildings have been in the lottery, the greater the chances are of winning. In order to do create the chance the lottery is divided into two parts. One part (Pool A) is for those who have lost at least three times, which means the building of units is guaranteed to win if it continues to play. The other part (Pool B) is all other applicants and the selection is random. It does become a bit more complicated than this, but this is the easiest and quickest way to explain the condo conversion lottery process.
What are the costs of condominium conversion?
Typically in the city of San Francisco, the costs incurred in condominium conversion are as follows:
City Fees: The City charges an inspection fee ranging from $2346 for two units to $2700 for six units, an application fee of $9,336 (2-4 unit) or $9,450(5-6 unit), a $250 lottery fee, a 3R report fee of $160, and a recording fee of about $12.
State Fees: The State application is required only for 5-6 units, and the fee is currently about $1,700. The State also requires a formal budget which is best prepared by a professional budget preparer at a cost of about $4,000.
Surveyor: Surveys start at about $5,000 and increase with building size.
Attorney: Typical attorney services include preparation of the City Application, monitoring/troubleshooting, advice on space assignment, CC&Rs, and assistance in lender signing and recordation.
Repairs: Building permit fees and repair costs depend on the extent of needed work.
Title: Most title companies will provide required title reports free of charge if the owner promises to use the same company for a post-conversion sale or refinance of the property.
Lender: Lender charges to sign the survey range upwards from $750.
How long does the condominium conversation take?
Starting from the submission of the application, it takes a 2-4 unit building approximately 8 months to fully convert. The Department of Public Works processes the application, along with the approval of many additional city departments. This 8 month period includes making required building improvements. In the case of 5-6 unit buildings, the process can take an additional 4 months.
If you’re in the process of a condominium conversion and you’re looking for an experience mortgage brokerage team, give Bob and Orlando. We’ve more than 25 years of experience in helping broker mortgages for people interested in condominium conversions.
