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It’s time to rethink condominium conversion policies. As a very recent buyer of a TIC in Nob Hill I must say this was the most difficult transaction I have ever experienced. And now that I own my percent of this building I dread facing the challenge of condo-conversion. Why convert? Because TICs are risky in so much as you share a deed (and often a loan) with other owners. If a co-owner goes into default it can jeopardize the property. A subdivided condominium releases you from the liability of other owners and is a more desirable property status to have but condos are also less affordable and not an option for many buyers.
The laws that govern converting apartments into condominiums were implemented in the 1970ís and have not been adjusted accordingly in the last 30+ years. Today’s economic climate means people move jobs - and their residences - much more frequently than we did in decades past. In order for me and my co-owners to apply for condominium conversion we must all live in our homes for a minimum of 3 years. The likelihood of 3 separate home owners staying put for 3 consecutive years is low. We all desire to do so, but will be penalized if one or more must sell in the interim. In addition, even if we do manage to remain in tact as a buying group for the next three years, we will still have a possible 7-year time horizon for our building to convert based on the condo lottery system. With so many un-rented, vacant units in the City, it seems absurd that only 200 are allowed to convert to owner-occupied condominium status each year. San Francisco is not in jeopardy of running out of rental units, and conversion-related evictions are not even legal.
Interestingly, local banks and lenders are changing their programs faster than San Francisco laws around TIC condominium conversions. In our building we were fortunate we were able to secure fractional loans so only our deed is tied together, not our loan funding. But imagine a bank is more progressive than the City of San Francisco! This indicates to me that we need to take a good look at the outdated regulations surrounding condo-conversion.
Tara Zanecki
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