HOA Detective™ – May 13, 2025: During the boom-town years of condo development before the 2008 subprime mortgage crash, converting an aging apartment complex into a condominium was not unlike owning a legal money printing operation. Developers could buy a tired 1970s rental property, slap on a new coat of paint, install modern light fixtures, dress up the kitchen with off-the-shelf cabinets, and walk away with millions after selling off the converted condos to a largely young, inexperienced demographic of entry-level home buyers. Often escaping with their newfound wealth unscathed by the legal system, or scrutiny by local building and planning officials as city leaders in places like Portland and Seattle, welcomed the infill housing created by the condo conversion boom. First-time buyers saw an affordable path to ownership. The regulators, for the most part, looked the other way.
Welcome to the era of the Cowboy Developer – a time when unchecked condo conversions galloped through America’s cities, leaving behind a legacy of underfunded associations, structural risks, and financially unstable condo associations that is just now being fully realized.
- The Cowboy Developer: A “Cowboy Developer” was never in it for the long haul. These high-flying real estate players, often operating with borrowed money through LLCs that vanished as quickly as they formed – often buried beneath layers of LLC ownership – specialized in low-cost conversions of aging apartment buildings into condominiums. The strategy was simple:
- Buy cheap: Target 1970s–80s apartment buildings originally designed as disposable rental stock.
- Upgrade just enough: Swap out some cabinets, install granite counters, and rebrand the property with a trendy name.
- Sell fast: Offload units to eager buyers—often with no long-term plan for capital replacement or reserve funding.
- Ride off into the sunset: Exit with profits while HOAs are left holding the bag.
- Double-Down: After fleeing the scene in a cloud of dust many of these Cowboy Developers were reported to have become millionaires on a single conversion. Beach Time for Gonzo: If they avoided the long arm of a construction defect lawsuit, a life of beach time leisure was the reward for many of these opportunistic cowboys.
The Buildings They Left Behind: Most of these properties were never built to be owned—they were designed as 20–30-year rentals. In many instances, the results included:
- Wood-frame construction with minimal soundproofing.
- No seismic upgrades, even in earthquake-prone zones.
- Decades-old waterproofing technology is left in place behind a new and shiny coat of paint.
- Old windows and doors
- Deteriorating plumbing is hidden behind newly finished walls, or worse yet, buried under a concrete slab foundation.
- Under-sized or technologically obsolete HVAC, and electrical systems.
After decades of landlord-style deferred maintenance masked by modern cosmetic improvements, these converted condominium units seemed to be the answer for many young, first-time homeowners.
Today, many of these buildings are now 40 to 50 years old, if not older. Far beyond the lifespan they were designed to achieve. The results are predictable: roof failures, siding rot, structural fatigue, and budget shortfalls.
Building Regulators – The Silent Majority: In most jurisdictions, there was no meaningful oversight of condo conversions until it was too late. Developers weren’t required to seed the reserve fund when a conversion offering involved a building that still contained major legacy systems, begging to be replaced. Pre-conversion condition assessments were rare in the “good old days,” with the notable exception of Oregon. Meanwhile, the disclosure requirements were, and remain to this day, wholly inadequate when it comes to disclosing the risks of purchasing a converted apartment or repurposed building that was never designed to be occupied as housing.
The result? Thousands of condo owners across the U.S. are now facing six-figure special assessments for major repairs—and many have no idea why.
How to Spot a Cowboy Conversion: The CIDA REPORT™ due diligence examination is one way of identifying former cowboy conversions. In the absence of such in-depth analysis, here is a list of features to look for when determining whether your condo building is the result of a “Cowboy Conversion.”
- Year built vs. Year converted: Compare the recording date of the condominium declaration to the age of the building. If it is obvious the building is 30-50 years old or older, and the declaration was approved and recorded after the -1990s, it is a safe bet the building is a converted condominium.
- While it is possible that a building was originally designed and built to be a condominium, but the declaration was not recorded until years later, this situation is somewhat rare.
- No Developer-provided Reserve Study: If the conversion was completed 20+ years ago, it is unlikely to find the original reserve study in circulation. However, if there is an archive of the Association’s documents (as should be the case) that dates to the original condo offering, and there is no RS associated with the original condominium offering, you are likely dealing with a Cowboy Conversion.
- Same can be said about the lack of a formal property condition assessment (PCA) prepared at the time of conversion. If not, your condo is likely the be the product a “Cowboy,” and one that is not risk-adverse.
- Lack of Seismic Upgrades: Especially in areas like the Pacific Northwest.
- Superficial Upgrades: New paint, carpet, and kitchen appliances, but pipes and wiring that look like they were installed when your grandmother was a child, you are likely living in a condominium converted by a Cowboy who left town just ahead of the posse.
What Can You Do: When an old building has been converted, with no meaningful signs of responsible conversion rehabilitation, the situation demands immediate attention to avoid future financial calamity. Proactive owners should initiate a deliberate remediation strategy that includes the following:
1. Commission a forensic reserve study that includes structural evaluation, not just surface assets.
2. Investigate your building’s history: When was it built? When was it converted? Who did the work?
3. Push for proper disclosures if you’re buying into a converted property. Don’t trust the glossy brochure.
4. Educate your board and neighbors: Many owners are unaware of the ticking time bomb they live in.
5. Work with experienced HOA experts who can see past the paperwork and into the property’s real risks.
Final Word from the Detective: Condo conversions aren’t inherently bad. When conversion is structured as transparent real estate development that includes a responsible level of upgrades, and a competent, realistic reserve plan, the converted apartment condo can provide valuable homeownership opportunities for the most important, under-served segment of the homebuyer public.
Unfortunately, the Cowboy Developers of the early 2000s weren’t in it for stewardship. They were in it for the score. Fast-forward, two decades later, the hangover is here, and many HOAs are waking up to find they’ve inherited a building with a nice view, but no financial parachute.
Because You’re Buying More Than a Home!
