Many condos for sale in Santa Monica are condo conversions. Some of these condos are TORCA conversions and have special rules that buyers should know about.
TORCA (an acronym for Tenant Ownership Rights Charter Amendment) was passed in 1984 by the city of Santa Monica to allow landlords to convert their multifamily apartment buildings into condos.
During the mid 80’s Landlords were fleeing Santa Monica in droves because Santa Monica had just passed the toughest Rent Control Law in the nation in 1979. Landlords were angry and feeling hurt by these laws and wanted to get out of the rental business there. The city of Santa Monica to this day maintains a strong ‘pro-tenant’ bias. Tenant Advocate group Santa Monica Renters Rights members have the majority vote on city council. TORCA ended in 1996; there are no new TORCA conversions today.
TORCA made it easier for Landlords to do condo conversions, while adding protection for tenants living in the units who would normally be evicted after the condos were sold. Converted Condos for sale were offered first to the tenants. If the tenant decided not to purchase the condo, under TORCA, they could stay in the unit permanently. The owner of a TORCA unit is may not displace the ORIGINAL tenant with an owner occupancy eviction. That means that the only way an owner may occupy a TORCA unit with the original tenant still living there is if the tenant leaves of their own free will or the tenant violates the terms of their rental agreement which gives just cause for eviction.
Once the original tenant has left, TORCA condos are just like any other Santa Monica condo- and it doesn’t affect resale value.
When doing your due dillegence on a TORCA conversion condo, the CC&Rs have the names of all the original tenants and their corresponding unit numbers.
Verify that the original tenant is no longer there. If the property has been sold a couple times in recent years and the owner is occupying it, this is reassurance that the original tenant left a long time ago.
In the event that the TORCA condo DOES still have the original tenant in place your options are pretty limited. You cannot move in and these units make pretty marginal investments. The Owner has to pay the HOA dues for the unit and can’t pass that cost on to the tenant. Couple that with way below market rent which can’t be raised more than the annual allowable increase and its very hard to cash flow break even or positive and consequently avoid a loss on the investment.