If you live in a rental unit in an urban area that's gentrifying, you may have heard of other buildings "going condo," after new management gets involved, much to the dismay of existing tenants.
It's important to understand the process that turns an apartment building into condominiums and renters into potential owners before it happens -- in case it happens to you. There's a series of steps that have to be followed:
- The developer submits what is known as the "red herring" to the attorney general's office. This is the developer's detailed plans for the building.
- The attorney general's office will hold onto the plans for four months to give interested parties time to review the red herring.
- The attorney general's office will go through the red herring with a fine-tooth comb and hammer out any kinks in the plans with the developer.
- The revised plans, known as the "black book," will be submitted for filing.
Once the black book is accepted for filing, the developer can sell you the apartment you live in. However, it's important not to wait until that point to get involved.
While it's true that some developers will try to evict tenants and sell their condos to all new people, that's the exception, not the rule. Most prefer to find buyers among the existing tenants when possible.
As a tenant, you will receive a copy of the red herring, and it's in your best interest to review it carefully. If you plan to purchase, now is the time to start negotiating for a better deal. Consultations with an architect or building inspector can help you gain leverage with the developer -- as can joining forces with other tenants who are interested in buying.
An attorney with experience handling condominium conversions and negotiations during the red herring phase can help protect your rights and see that you get a fair deal.