Many in the real estate industry refer to a type of development known as a “land condominium,” but the term is typically not codified in state statutes or local ordinances. So what is a land condominium? How is it different from a typical condominium development? How is it different from a typical subdivision of property? When would a developer opt to create a land condominium rather than a traditional condominium or a subdivision?
Land condominiums are condominiums where parcels of land are the condominium units. There may or may not be structures built on the units, but the structure is treated as a part of the unit. If there are shared amenities such as private roads, a clubhouse, pool, and an entrance gate these amenities are often common elements of the condominium and are owned in common by all of the unit owners. A land condominium is different from a traditional condominium where the units are defined by reference to the interior or exterior of a structure or structures. Rather, a land condominium appears to resemble a traditional subdivision of property where land is divided into lots and may include shared amenities as those listed above but the amenities would be owned by an owners’ association.
One benefit to establishing a land condominium in some jurisdictions is that the developer may avoid certain requirements of the applicable municipality or county (including setbacks, buffers, road widths, and sewer lateral requirements) since unit boundaries may not be treated as property lines by some governing bodies. For example, if a particular zoning ordinance requires a ten foot side setback, a developer may be able to build multiple homes with a smaller setback (or no setback) so long as the side setback exists as to the larger condominium parcel. This benefit is not always available. Many state condominium statues, including those that are modeled after the Uniform Condominium Act, provide that local regulations and building codes may not impose any requirements upon condominiums which they would not impose on physically identical development under a different form of ownership. This means that condominium developments identical to a subdivision could be subject to the same ordinances (e.g., setbacks). In short, land condominiums may be treated the same or more favorably than other, identical forms of development, but they may not be treated worse.
Another benefit to a land condominium is the flexibility for a developer to designate portions of the development as common or limited common elements—thus keeping more power within the association. For example, a developer may choose to designate the land area that is the footprint of a building or dwelling as the land unit and the remainder of the exterior improvements (e.g. driveway, landscaping, and fences) as limited common elements. Limited common elements are owned in common by all of the unit owners, but are designated for exclusive use by less than all of the owners (usually one or two unit owners in the case of a driveway). This designation provides the association with control over the maintenance, repair, and replacement of such limited common elements at the expense of the benefitted unit owners, if the declaration so provides. Developers may find this level of control is desirable in second home communities where exterior maintenance may be burdensome for the owners or in communities where the developer prefers to control the aesthetics for its own sales or other purposes.
An often overlooked benefit to a land condominium is the automatic lien for assessments and super priority status for assessments that many condominium statutes provide for condominium associations. In jurisdictions where there are little no statutes governing subdivisions, delinquent subdivision association assessments can require the association to file a lien and often be subordinate to other prior liens that may make enforcement an impractical option.
The burdens of establishing land condominiums are that in some jurisdictions there are very little or no statutory requirements for subdivisions and creating a land condominium subjects the developer to the applicable condominium or common interest ownership act. This can impose additional disclosure burdens and purchaser rescission rights at the time of sale, shorter periods of developer control of the board of directors of the association, and higher standards of care for the developer representatives that serve on the initial board of directors of the association. Depending on the type and size of the development and the relevant market, these burdens may outweigh the benefits for some developers. Careful consideration in consultation with an attorney licensed in the applicable jurisdiction must be made before deciding whether a land condominium is an appropriate way to develop a parcel.
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