Can Owners Challenge Deconversions?

In a previous article, we dove into the upswing in condo deconversions in some parts of the country, with multi-unit buildings that were converted from apartments years ago reverting back to rental units. The Illinois Court of Appeals recently issued an important ruling addressing owners’ ability to challenge such moves.

“The ruling is good for associations because it provides absolute clarity for boards that have been struggling with owners who say you need to take a vote before you can even go down this path,” says Kelly Elmore, a principal in the Chicago office of Kovitz Shifrin Nesbit. (Elmore’s firm was hired to handle the closing for this sale but wasn’t involved in the litigation.)

“In some associations, owners are very, very opposed to the sale,” Elmore told us when we talked to her for our earlier article. Some such owners may argue that the association’s board needs owner approval before it can even begin looking into the possibility of a sale.

That’s what happened in the Illinois case, where several owners sued their association and the board. They alleged the defendants were required to disclose information to them and obtain two-thirds approval from the owners before investigating and negotiating a proposed bulk sale of condo units.

By failing to do so, the owners claimed, the defendants violated two sections of the Illinois Condominium Property Act and breached their fiduciary duties. The trial court dismissed the claims before trial, and the owners appealed.

Read the full story now to learn how everything shook out, and important lessons to take away from the case:

Condo Board Can Negotiate Building Sale Without Owner Approval

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Matt Humphrey
President