Condominium boards for two luxury downtown high-rises aim to market a controlled amount of available rentals, in an effort to maintain the value of the properties, according to Crain’s.
One of the buildings, located at 600 N. Fairbanks Court (pictured), approved the limitation of rental availability to 27 percent of the building, allowing for the rental of 62 out of the 230 units among the 41-story tower.
Built into the new proposal is a 3 percent hardship clause, which enables financially strained owners beyond the 27 percent cap to rent out their units.
The other property, at 130 N. Garland Court, plans to vote on a proposal restricting rentals to either 15 percent or 20 percent of the 357-unit Heritage building.
“By implementing the leasing limitation, the Heritage will have the broadest availability of lenders who will loan on residential units in the building,” says the document from the Heritage board. “Expanding the availability of mortgage lenders will make residential units easier to both resell and refinance — thus increasing the marketability and overall value of the residential units.”
The owners hope to attract renters while preserving property values, allowing them the best of both worlds in a market where property sales are dwindling.
Rental restrictions such as this started popping up around 2005/2006. With the benefit of hindsight, they have proven to be a bad idea. Say you have an owner that gets transferred out of town. The unit is mortgaged. He can’t afford to continue to make the payments. He can’t rent out the unit. What happens? Strategic default and foreclosure. A high number of rentals might be bad, but a high number of foreclosures is much worse. And did I mention the delinquent assessments that go along with the foreclosures? The condo assn takes it in the neck as well. A classic example of the cure being worse than the disease.