Revocation of Condominium Plan, Dissolution of Condominium Plan in California

6 Replies

Bullet Points:

  • I am the owner of a triplex that was converted to condos.
  • We have a lot of equity and I'd like to do a re-fi. 
  • You can’t get a government backed refi on a condo if a single owner (of a 2 to 4 unit property) owns more than one of the units. I own all three.
  • If I did want to sell a unit (which I don’t ), the buyer wouldn’t be able to get a government backed loan. I don’t see anyone buying a condo in this area, with a (probably more expensive) non-traditional loan.
  • I'm trying to convert the property back to a triplex.
  • Our long term plan to is to hold the property and continue to rent out the units.

In addition to wishing to make use of our equity to get a refi, do some improvements, increase the rent and value, I need an exit strategy.  More importantly, if I get hit by a bus next week, I want my family to have the option to liquidate (fairly easily) that asset if they choose to.

When I first researched converting the property back to a triplex, the city told me that I needed to do a Reversion to Acreage. They did some research before they gave me that direction and advised me to talk to various real estate professionals, which I did.

Now I’ve begun that process and the city has discovered that the way to go on this is actually something called a Revocation of Condominium Plan, or Dissolution of Condominium Plan. The people at the city have no experience with this. They can manage their part of the process, but have cautioned me that they don’t know what will happen when it passes to the California Bureau of Real Estate. They are advising me to proceed with caution. This is all costing money.

I’ve searched the California Bureau of Real Estate and can’t find anything on this issue. I plan to call when I have a chance (I work full time).

I feel like I can’t be the only landlord in California coming up against this. My common sense tells me that there’d be no reason for the state to refuse to sign off on it, but…I really don’t know what to expect.

Does anyone have any experience with this?  Also, if there's another forum where this would be more appropriate, please advise.  Thanks!

What is fascinating to me is that there is an incredible upside potential for the general case of "conversion reversion" projects. In my area, you can sell an apartment building for a premium. Fractured condo? 1/3 the value, per unit. Why? Because you can't GUARANTEE that you'll get full ownership. If you could, well... then you obviously could sell your interest after some legal filings, as an apartment.

I contend that the "consolidators" (those people willing to commit capital to "buy in" to a fractured condo ownership, with intent to consolidate) could (if successful) be the best game in town. Fractured condos seem to be "off the radar" to suitor companies. In the current environment, I can't understand why the market doesn't experience someone with enough vision to consolidate the (low value) fractured condos... and effectuate a conversion to apartment (single owner) that can have a significant valuation boost...

@Chris Martin

  Thanks for your input on this. I am still working through the process. I've had a lot of frustration. There just isn't that much information or experience out there.  I agree, though, it would be interesting to see how profitable the "conversion reversion" niche could be.

@Jeri OMahoney did you ever get this issue resolved? I'm facing the same scenario in Texas and wondering what a solution could be.

Originally posted by @Jeri OMahoney :

Bullet Points:

  • I am the owner of a triplex that was converted to condos.
  • We have a lot of equity and I'd like to do a re-fi. 
  • You can’t get a government backed refi on a condo if a single owner (of a 2 to 4 unit property) owns more than one of the units. I own all three.
  • If I did want to sell a unit (which I don’t ), the buyer wouldn’t be able to get a government backed loan. I don’t see anyone buying a condo in this area, with a (probably more expensive) non-traditional loan.
  • I'm trying to convert the property back to a triplex.
  • Our long term plan to is to hold the property and continue to rent out the units.

In addition to wishing to make use of our equity to get a refi, do some improvements, increase the rent and value, I need an exit strategy.  More importantly, if I get hit by a bus next week, I want my family to have the option to liquidate (fairly easily) that asset if they choose to.

When I first researched converting the property back to a triplex, the city told me that I needed to do a Reversion to Acreage. They did some research before they gave me that direction and advised me to talk to various real estate professionals, which I did.

Now I’ve begun that process and the city has discovered that the way to go on this is actually something called a Revocation of Condominium Plan, or Dissolution of Condominium Plan. The people at the city have no experience with this. They can manage their part of the process, but have cautioned me that they don’t know what will happen when it passes to the California Bureau of Real Estate. They are advising me to proceed with caution. This is all costing money.

I’ve searched the California Bureau of Real Estate and can’t find anything on this issue. I plan to call when I have a chance (I work full time).

I feel like I can’t be the only landlord in California coming up against this. My common sense tells me that there’d be no reason for the state to refuse to sign off on it, but…I really don’t know what to expect.

Does anyone have any experience with this?  Also, if there's another forum where this would be more appropriate, please advise.  Thanks!

I would also like to hear about how it went or if anyone is having any success doing this. 

@Cody Cook @Bart H.

We did get it resolved. It took a few steps. I have to say, though that I think the process is going to be specific to your location.  I don't have all the info in front of me, but I'll give you what I can and maybe follow up later.

Key issues in this:

1. After a few calls to the California BRE I finally reached someone who definitively told me the BRE didn't need or want to be involved because it was under 5 units. They said it should be handled at the local level. When I took that information to the city, they worked out what their process would be.

2. My surveyor, the County Assessor and the City Development Director were all very helpful in their attempt to find a path to completing the process. They all communicated with each other by email or phone a couple of times to hash out details that I was clueless about.

3. There had never been an actual "condo" situation in that I'd never set up a HOA or formed any other body related to governing or accounting.

So here are the basics of the steps I had to complete:

COUNTY: I had to file a Declaration of Revocation of Condominium Plan with the County. The justification for the revocation was based on California code as follows:

“No condominium project, as defined in Section 1351(f) of the California Civil Code, has been created because there has been no conveyance of a separate interest coupled with an interest in the Common Area or membership in the Neighborhood Association, as such terms are defined in the Neighborhood Declaration.”

CITY: In order to get the appropriate approvals and signatures, the city had me apply for a “Development Permit.” I had to get a current survey map created even though they were identical to those on file, but I understand why they needed their ducks in a row. I had to pay an application fee (about $3k) and then it went through the normal approval process without a hitch.

COUNTY AGAIN: Then I took the County Revocation of Condominium document and the City Development Permit Approval to the County Assessor and completed a form called a “Parcel Combine Request.” It took several weeks, but a new parcel map and new parcel number were generated.

We have since refinanced the property and expect to get only 1 property tax bill this year instead of the 3 (for the 3 “condos”) we had in the past.

As I said, I think this all rests on what your local laws are in regard to this process, but I wish you a lot of luck!

Jeri

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