Condo Conversion Zoning and Subdivision

Last Updated: September 25, 2023

Attaining condo conversion zoning and other necessary permissions from a city or town should really test whether the change from rental housing to condominium ownership is in the public interest.

Sometimes city councils think that home ownership and a higher property tax base are so important that they overlook the by-products of the conversion, which may include displacing long-term residents, decreasing the supply of moderate-income housing in a particular neighborhood, and creating a product that might be not age well as a condominium.

We started writing about condo conversion zoning because we kept receiving questions about what a city council can do about conversions. Our visitors seemed to think that zoning would solve the problems of gentrification and displacement, should these be threats in a particular situation.

However, often the zoning ordinance is fairly silent about condo conversion zoning. In fact, condominium conversion is more appropriately viewed as a sub-set of the process of subdividing land.

Instead of subdividing each part of one parcel of land into a lot for sale, a developer is subdividing the airspace into different ownerships, and sometimes allocating patios and yards to particular units. However, the land is held in common, and usually the building or buildings have common spaces also.

So in our opinion, you should govern condo conversions under the subdivision regulation rather than the zoning ordinance. This has worked best in my experience as a city planner.

But we will just be optimistic and assume that you have combined all your ordinances related to real estate development into one development code. That is a sometimes tedious, but really worthwhile process.

The Checklist for Condo Conversion Zoning

Regardless of whether these rules are contained in the zoning, subdivision, or unified development codes, or whether the city enacts a stand-alone ordinance, we think that these matters should be addressed:

Review to ensure that the resulting condominiums will meet current zoning standards in all respects. If this is not possible, due to the building design and a reasonable allocation of space within the condo framework, the developer applicant should be required to apply for a zoning variance. Further, the variance should not be granted unless the standards in the zoning ordinance are met.
Assure that each separate unit will meet existing building, fire, property maintenance, and other codes after the conversion. Site plan review should be required, but most municipalities also will require building code review. If you want to be extra tough and discourage condominium conversion as a matter of public policy, you can require that these codes be met before the conversion is made, rather than within a reasonable time after the ownership changes start taking place. Frankly, I think an important consideration on this point is the percentage of the existing tenants who will become homeowners after the conversion.
Provide for review of the CC&Rs, which govern everything from land and building use to aesthetics, either by the city attorney and/or a private attorney. This review should be quite aggressive in assuring that the assignment of property rights is clear. However, we also don't like covenants that give an HOA the power to make any kind of rule imaginable. If you could read our mail, you would understand that overly autocratic HOAs are a real problem.
Guarantee adequate parking, curbside delivery and pickup options, and electric vehicle charging stations, if possible.
Preserve the public interest in the maintenance of common amenities. If common areas are not maintained at some point in the future because residents don't want to increase their homeowners association fees, we think that the city government should have the right to place liens or assessments on the property, as allowed by state law, in order that the city can perform the necessary maintenance and have a method of collecting that money eventually. Our website visitors have complained about under-maintenance or neglect of everything from park spaces to lakes to sewage lagoons.
Address any peculiar situations related to sign regulation, including "for sale" signs for individual units and also specific situations pertaining to commercial land uses that might be involved in the condo conversion zoning.
Write provisions for allowing existing tenants a "first right of refusal" on the purchase of the unit they are currently occupying. This means that before the unit is offered for sale to anyone else, the tenant must be given notice of the conversion and a reasonable time period to purchase the unit he or she is now occupying. If they "refuse" to purchase, then the unit can be offered for sale to others. Be aware that many states now regulate this aspect of condo conversion.
If desired, other matters regulated might include a requirement for a public hearing or tenant meeting, upgraded soundproofing, and proof of financial capability to carry out the project.

Another option for some cities is an inclusionary zoning provision requiring that low-income, elderly, or disabled residents be able to stay in place permanently or for a designated number of years. Sometimes units are set aside for low-income or moderate-income residents. Proponents of keeping an area's housing affordable and avoiding gentrification may find this pathway is equally as helpful as strict regulation of condominium creation.

We're assuming that state law will provide for adequate fire protection, which is commonly much more strict for condos than for apartments, but if there are no applicable state or local laws otherwise, that area should be covered as well.

Some states also regulate condominium creation in general, so keep in mind that additional state requirements may apply, even if the buildings are pre-existing. We have been largely silent on commercial and industrial condominium conversions, but in those instances, safety regulations and avoiding potential legal complications after the conversion are paramount.