Turning Rental Units Into Individually Owned Property
Converting a two- or three-family property into condominiums can substantially increase the value of each unit, since a buyer purchasing their own unit will often pay more than an investor buying the entire building. That value only holds up if the conversion is done correctly. Rhode Island law imposes specific requirements on how a condominium is created, what existing tenants are owed, and what a buyer must receive before closing.
A Rhode Island condominium law attorney can guide you through each requirement so your conversion holds up and your units are marketable.
How Do You Legally Create a Condominium in Rhode Island?
Creating a condominium requires more than deciding to sell individual units. Rhode Island law establishes specific legal and recording requirements before a condominium can be created, including:
- Recording a Declaration of Condominium–The declaration establishes the condominium and must be recorded in the land evidence records of the city or town where the property is located.
- Preparing Plats and Plans–Recorded plats and plans must identify each unit, the common elements, and other details required under Rhode Island law.
- Complying With the Rhode Island Condominium Act–Condominiums created after July 1, 1982, are governed by the Rhode Island Condominium Act, which specifies the information that must be included in the declaration and related documents.
Mistakes in these formation documents can delay a project, create title issues, and lead to disputes with purchasers or lenders. Taking the time to prepare and record them correctly from the outset can help avoid costly problems later.
What Are Your Obligations to Existing Tenants?
If your two- or three-family property has tenants, Rhode Island law requires you to give them at least 120 days’ notice of the conversion before they can be required to vacate, along with a copy of the public offering statement. Rent cannot be raised during that notice period. Each tenant must be given 60 days to purchase their own unit; if they decline, you cannot offer better terms to the public for the next 180 days. Tenants who have lived in their unit for 10 years or more, or who are 62 or older, are entitled to a full year of notice, 180 days to decide whether to buy, and reasonable moving expenses within a 50-mile radius.
Will the Conversion Trigger Building or Fire Code Upgrades?
Converting rental units to individually owned condominiums is generally treated as a change in use, not simply a change in ownership. Under Rhode Island’s fire code, a change of use or occupancy subjects the building to a review under the current code, which may require your fire suppression, alarm, and egress systems to be brought up to date, even if nothing about the physical layout changes. Budgeting for this early, before you commit to a sale timeline, avoids a costly surprise mid-conversion.
Can Your City or Town Block a Condo Conversion?
Rhode Island law prevents a municipality from prohibiting the condominium form of ownership or imposing requirements on a condominium that would not apply to the same physical property under a different ownership structure. Your town cannot deny the conversion solely because you are choosing to own a condominium. That said, your property must still meet all zoning, building code, and use requirements that would otherwise apply, so any existing violations or nonconforming use issues will need to be resolved before you convert.
Do You Need to Set Up a Condominium Association?
Yes. Once the declaration is recorded, Rhode Island law requires that the units be governed by a unit owners’ association, with bylaws covering meetings, voting, and the collection of common expenses. For a two- or three-family conversion, this association will likely consist of just the unit owners themselves, but the legal formalities still apply. Skipping this step, or drafting bylaws that do not comply with the Condominium Act, can create disputes down the road over who is responsible for the roof, the driveway, or a shared foundation.
What Must Buyers Receive Before You Can Sell a Unit?
Before selling any unit, you generally must provide each buyer with a public offering statement that summarizes the declaration and discloses key information about the condominium. Buyers have the right to cancel their purchase agreement within 10 days of receiving that statement, so timing its delivery correctly is essential to keeping your closing schedule intact.
Talk to a Condominium Conversion Attorney First
A condo conversion involves title work, tenant notices, and disclosure documents that all need to work together. PALUMBO LAW helps Rhode Island property owners convert two- and three-family properties into legally sound, marketable condominiums. Call today to start your conversion the right way.