- August 29, 2018
The Firm’s recent success in completing a commercial condominium deconversion in the face of opposition illustrates the importance of experienced real estate lawyers working in collaboration with skillful litigators to help real estate developers and investors unlock value without picking unnecessary fights.
The client engaged real estate partner Steve Schuster to develop and implement a plan for acquiring and deconverting a multi-unit commercial condominium development that was struggling to attract individual buyers. Most units remained unpurchased and unbuilt years after the building’s completion, and the client recognized that its value could best be realized by purchasing the property and deconverting the units from condominiums to rental units.
In the current real estate market, condominium deconversion offers lucrative opportunities for developers and unit owners alike. Typically, a deconversion under Sections 15 and 16 of the Illinois Condominium Property Act involves a single buyer first acquiring the entire property directly from the condominium association, often allowing unit owners to obtain above-market values in the process. Approval of 75 percent of unit owners is required for an offer to be accepted and the sale consummated. However, the process can be derailed by unit owners who refuse to participate, even when the sale has been lawfully approved by fellow unit owners.
In this particular transaction, Schuster’s experience allowed him to identify potential obstacles the client faced to successfully purchasing and deconverting the property. Armed with that analysis, Schuster was able to craft an approach that put the client in the strongest position to counter anticipated resistance from commercial unit owners opposing the sale.
Having foreseen the dispute, Schuster also sought the assistance of firm litigator Eric VanderPloeg early in the transaction to analyze anticipated objections from a dispute perspective. Instead of running into court headfirst, Schuster and VanderPloeg helped the client thoughtfully adjust its strategy and carry out the sale in a way that could withstand challenges from owners who opposed it.
When litigation finally ensued, the approach the client had taken allowed VanderPloeg to obtain a favorable court ruling in the early stages of the litigation, avoiding a protracted—and even more costly—fight that would have drained value and perhaps scuttled the deconversion entirely.
“Condominium deconversions have been making headlines lately along with issues arising from holdout owners,” said Schuster. “This outcome was the result of a client who invested the time to team with Eric and me. We crafted a strategy that fit these circumstances. We stayed with our plan, allowing our team to see things through to a successful conclusion.”