Sky-high compromise

Condo board at Hancock tower takes another shot at rental rules

02/29/2012 10:00 PM

Contributing Reporter

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A fight over rental rules at the John Hancock Center may be nearing an end as the building’s condo board pushes a diluted proposal to cap leasing at the downtown skyscraper.

Once listed as the second tallest building in the world, the 100-story Hancock tower, at 875 N. Michigan Ave. boasts an observatory, numerous restaurants and shops, office space, and over 700 luxury condominium units in the building’s middle floors.

Last September, in an effort to fortify values in the landmark skyscraper, the building’s condo board, dubbed the 175 E. Delaware Place Home Owners Association (after the residential portion of the building), attempted to vote on a rule that would limit the number of units that could potentially be shopped out as rental dwellings.

The proposal, which would have capped the rental stock at 147 units, drew jeers from some owners in the building. One of them, Coupon Cabin CEO Scott Kluth, posted a suit against the board — headed by president Michael Stickney — in light of the plan, which he argued was in excess of the board’s authority.

Kluth’s case was eventually thrown out of court, and the proposal sat in bylaw limbo, until recently, when the board came back with a revised application to put a “soft cap” on renting in the Gold Coast high-rise.

According to an article in Crain’s last week, in early February, the board released a new proposal which expanded the rental limit to 160 units and relaxed provisions to allow owners who have lived at the Hancock for two years to lease their units for two one-year terms over a five-year window. That allowance would hold up even if the number of rented units exceeds the cap.

The new proposal also takes the form of an amendment which would require a supermajority vote among residents, as opposed to the previously suggested rule that would have been decided on by the board.

The Hancock currently housed 147 leased condos as of early last year, according to sources in the Crain’s article.

Mark Pearlstein, the attorney for the building’s condo board, said that the new cap had been set to allow for some breathing room for potential leasing owners in the building.

“You could describe it as a concession; I think it’s just increasing the stability of existing owners at the time that this amendment is passed,” he said.

Pearlstein said that the board was gathering the ballots and that a vote count was presently unavailable.

Calls to the Kluth were not returned for this story, but an attorney for the internet CEO told Crain’s that his client intended to take the board back to court if the proposal passed.

The rental regulation could have varied effects on sales in the building, depending on who you ask.

The presence of owners in a building can speak to the permanence of a condo community, lending to the safety of elderly people in-residence and making for a more welcome atmosphere in common areas such as lobbies and gyms.

Sheldon Salnick, a sales associate with Prudential Rubloff, said that he is inclined to steer buyers towards owner-inhabited developments.

“When I’m taking a client out, I ask what the owner occupancy and what the rental cap is,” he said. “The newer buildings are putting in rental caps immediately.”

The renter-to-owner ratio also comes into play for buyers in search of financing, he said.

“The banks are getting very difficult, and they don’t want to lend in buildings that have less than 70 percent owner occupancy,” said Salnick, who specializes in markets in and around the Gold Coast area.

While the reasoning behind a rental cap is understood, condo boards like the one at the Hancock tower may be losing sight of their prospects, said Ebony Dawn Lucas, a managing partner with the Property Law Group, a firm that works on condo law cases.

“Given the current housing market, if people are moving and they are unable to sell their units at market value … then they just walk away,” she said.

Lucas said that condo associations should seriously weigh their reasons for imposing rental restrictions.

“Certainly, forcing a foreclosure in your building doesn’t help financing either,” she said.

While the debate at the Hancock remains open for interpretation, the call for an owner-led vote, if favorable, could be the winning stroke for the board.

“Once the board gets the votes of the ownership, the court’s will presumptively treat it as reasonable, and will not second guess what the owner’s decide to do,” said David Rudolph, a condo law attorney in Chicago.

Rudolph said that the amendment sent a clear message to buyers about what the Hancock condo board looks for in a neighbor.

“What it does is dissuade the true investor-owner,” he said.

Condo board at Hancock tower takes another shot at rental rules

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By innout from North Side
Posted: 03/22/2012 12:10 PM

Our Condo Association FIRED Ebony Lucas (a.k.a. Ebony Wilkerson). She overbilled for no results. She also started proceedings on a long foreclosed unit without Board consent. The result was her demanding payment for that. That prompted the Board to finally fire her. She's also part of "Peace of Mind" Properties.