For personal reasons, I just looked into this and have some idea how it works. It varies from state to state and your condo association’s governing documents might change this so your mileage may vary.
Generally, the developer must get the votes of a majority or a supermajority (75-80% is common) of the units’ owners to agree to terminate the condo association and sell the property. (From what I can tell, Virginia’s Condo Law requires at least 80% of owners to approve the sale, or more if the condo instruments, like the by-laws, require a larger number).
The developer can get the votes by buying up units on the open market, negotiating through the condo association to buy all the units simultaneously (subject to the approval of the requisite number of unit owners), or it can make offers to individual unit owners as it sees fit. It can also use a mix of these strategies in the same deal. It might start by quietly buying up units sold on the public market. Then it might make private offers to the units owned by investors. Finally, it might make offers to select other owner/residents. Thus, once the developer has a good chunk of units, it needs a proportionally smaller number of the remaining owners to force the sale. For example, if there are 20 units in the building, the developer needs 80% of unit owners to agree, and the developer already owns 12 units, it needs only four of the remaining eight owners to agree to the sale.
Developers can also buy proxy rights without buying the units themselves. For example, your neighbor might sell the developer an option to purchase his unit and the rights for the developer to vote your neighbor’s proxy approving the sale. So, the developer can quietly start acquiring the votes it needs to achieve the termination of the condo without generating a lot of public sales and records.
Even requiring a supermajority to approve the sale doesn’t protect reluctant sellers as much as you might imagine. Once the developer has more than 50% of the units (or even just 50% of the proxies necessary to elect the board of directors and set policy), the developer can start to play hardball. It can do things like (subject to the condo association instruments) nominate all the directors to the board, change the association rules in inconvenient ways - imposing special assessments for repairs and renovations, closing the pool, closing parking lots, prohibiting plants or furniture on balconies - and levying fines to owners who fail to comply. So, once the developer has control of over 50% of the units, the condo might become a much less pleasant and more expensive place to live for the holdouts.
Furthermore, once more than 50% of the units are investor-owned, it will be very hard for any would-be buyers to get a conventional mortgage on the property, so your pool of alternative buyers will likely get limited to cash buyers who are fewer and farther between. Then, the developer may have the holdouts over a barrel and its offers to them might start dropping.
Finally, a municipality can seize the property by eminent domain and then sell the property to the developer. The municipality must pay every owner the fair market value of their property. I have no idea if this is happening where you live but, if so, you would probably read about it in the local papers. It’s newsworthy when a city starts kicking its residents out of their homes so it doesn’t happen too often.
Not in my state. In Virginia, the developers can negotiate with the homeowners’ association subject to the approval of 80% of the condo owners. The homeowners’ association has a fiduciary duty to its members, so even if the developer has taken control of the association, it can’t entirely screw the minority members. The minority members can be in a precarious position however.
Some condo associations (and some states) require 100% of condo owners to approve any sale. This suggests that the developer will have to make offers to everyone but I believe such places are in the minority. It’s hard to redevelop condos in places that require unanimous consent because a single holdout can try to extract so much money from the developer that it’s no longer worth pursuing the project and the developer just walks away.
If your current unit has no mortgage, there is no reason you and developer couldn’t agree to this but it seems unlikely either of you would really want to. Usually the developer builds more expensive condos than the ones it replaces so trading your old condo for a new one might not be in the developers’ interest. He also doesn’t want to make promises so early in the development about things like the size and layout of units, the amenities, or the prices, so the developer is unlikely to make any guarantees to you about the condo you would be getting. It’s probably not in your interest either because you would be giving up your condo for the unsecured promise of the developer to give you a new condo. If the project goes bust, you might lose everything. Take money instead.
It’s pretty common for developers to offer slight discounts to former residents. Be prepared to wait a few years for the project to finish, however, and don’t expect a super-duper deal.
It will be effectively impossible to trade the old condo for the new one while keeping your mortgage. The developer will need clean title to the property, which it won’t get if your mortgage is still on the property. Your mortgage lender will also demand to be repaid when you sell the unit to the developer because it will otherwise have no collateral. There is no simple way for you to hold onto the mortgage and attach it to a new property.*
*Okay, if you throw enough money at it to pay lawyers, negotiate security agreements, and make concessions to the people affected, perhaps it could be done, subject to state law, but I’m not sure and I’m not doing the research. Perhaps you could: (1) get your lender to agree to not call the mortgage upon your sale and instead accept a priority lien on the developer’s property; (2) get the developer to agree to buy your property encumbered by your mortgage; (3) get the developer to accept that your mortgage lender, as the first lien holder, will now impose a bunch of weird and perhaps uneconomical conditions on redeveloping the property (e.g., what does your mortgage say about what happens if your condo is destroyed and you choose to rebuild? Will those conditions apply to the developer now?); (4) get the developer to agree to secure a higher-cost second mortgage on the condo property just to accommodate your desire to keep your first mortgage; and (5) get the project’s investors to accept that they will get one fewer unit to sell. How much would all this cost? I expect a few hundred thousand dollars might pay for the legal research, title research, and concessions necessary to make everyone involved play along. Also, I think this would eliminate the deductibility of your mortgage interest since the mortgage would no longer be on a home, but factor in some more money for an accountant to figure that out for you. How badly do you want to keep your low-interest rate mortgage?