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Condo Conversions

Article written by Jack Carr, P.E., R.S., LEED AP, Criterium Engineers
Spring is here, when a man’s fancy turns to thoughts of scheduling his traditional Maine summer vacation. Whether the dream is for a cozy cabin on an idyllic lake or a picturesque cottage on the sea coast, surprises may soon be at hand. They’ve gone condo.
From Kittery to the County, all across Maine the trend seems to be accelerating. Where once it was primarily urban apartment buildings being the focus of developers’ condominium conversion plans, now many new forms of rental properties are being converted. Seasonal camps, seaside motels, and resort hotels are going toward unit ownership in either a Home Owners Association or condominium format.
When municipalities noticed a few years ago the potential impact on their citizens and infrastructure of apartments being converted to condominiums, they reacted. Draft ordinances began to spring up at city council meetings. Most of the ordinances were targeted at protecting the current tenants in the apartments to be converted. Portland’s Article VII “Condominium Conversion” ordinance became the model for many of Maine’s second tier cities. South Portland’s Article IX “Regulation of Condominium Conversions” was seen by many to be even more aggressive in protecting the rights of current tenants.
The aims of these ordinances were to give the tenants sufficient notice of their rights based on their seniority in the apartment. These rights might include due notice of when the tenant is required to vacate, exclusive options to purchase their unit, eligibility for relocation payments, and relocation referral assistance. These ordinances continue to evolve.  Many communities, both large and small, have yet to adopt any condominium ordinances at all. Instead they are depending on the Maine Condominium Act’s Article IV “Protection of Condominium Purchasers” (Section 1604-105) to provide the needed safeguards for responsible condominium conversion development.
This portion of the statute requires the developer to obtain from an independent architect or engineer, who has no affiliation to the developer, a comprehensive assessment of the current condition of the property. The issues addressed include all structural components, waste disposal systems, water systems, and the mechanical and electrical installation materials used in the condominium complex-to-be.
To complement this report, the consultant is to provide an opinion on the useful life of each item reported as well as an estimate of the cost of replacement. Furthermore, a list of any outstanding notices of uncured violations of building code or other municipal, state, or federal laws or regulations, together with the estimated cost of curing those violations, must be provided.
Though this information might be sufficient for a typical apartment building condominium conversion, it may not be sufficient for some of the new vacation cottage complexes that are envisioned for conversion. These properties may come with a lot of other municipal baggage that need to be clearly understood by both the developer and eventually the association and unit buyer.
As an example, many of these properties are in very seasonal communities with limited infrastructure, municipal services, and school resources. The unrestricted entry of new families seeking year-round services will be viewed with great concern when these communities accurately assess the long term impact. Some towns, such as Wells, have placed significant limitations on seasonal occupancy of these new condominium units.
Many of these “camp” condominiums are located on shorelines and/or have large tracts of undeveloped land. Their conversions will come under a wide range of permitting and regulatory restrictions including water setbacks, wildlife and erosion control, vernal pool protection areas, and minimum acreage per unit requirements.
Property management of these seasonal properties may present many new challenges. Maine has had a long history of large resort condominium complexes such as in the major ski areas. These properties are run by on-site management staff or at least are accessible year-round for maintenance and inspection. The new “camp” condominiums located in remote areas will be totally unoccupied for long periods of time with no on-site property management. The property security and insurance risks are obvious.
Finding competent property managers willing to take on these types of “camp” condominiums may be very difficult. In general, Maine condominiums have a history of not utilizing professional property managers. Part of this stems from an independent Yankee attitude, but also because Maine’s condominiums have fewer units and fewer amenities compared on average to other parts of the country. This lack of economies-of-scale does not make an attractive business model for property managers, particularly in Maine’s rural areas where these camp complexes are located.
Yet despite these challenges, this trend in conversions of camps and cottages can be expected to continue for the same reasons condotels are a surging trend in Florida. Both areas are vacation destination spots with buyers seeking economic seasonal stays for personal or investment purposes. It will be the job of the local municipalities and real estate service professionals to make them work.