What Are the Essentials of Condominium Development?
The creation of a condominium involves unique regulatory requirements. What must be taken into account during the planning phase, and what ordinances must be followed? John Hanna, a greatly experienced land use lawyer, delves into these concerns below.
Although the concept of shared real property interests can be traced back to medieval Germany, and perhaps even to ancient Rome, statutory authority for sharing real property ownership did not exist in the United States until the 1800s, and it was not until the early 1960s that the first condominium statutes were passed. In California, the California Condominium Act was adopted in 1963 and later was renamed the Davis-Stirling Common Interest Development Act.
Although there are other types of common interest developments (such as stock cooperatives, planned developments and community apartments), condominiums differ from the others in that the separate interest portion of a condominium can be in a building, a portion of a building, in the underlying land, or the airspace above, or any separately described three-dimensional parcel containing either air, earth, water, a building, or any combination of the foregoing. It is essential that the title to a portion of the property be held by the holders of separate interests as tenants-in-common. Unlike other common interest developments, the creation of a condominium requires both a recorded parcel map or subdivision map and a recorded condominium plan. These two documents may be combined into a single document, or the condominium plan can be a standalone document, separate from the recorded subdivision or parcel map.
In planning for the development of any multi-family residential project, it is important to determine whether the project is intended to be forever a rental project, a for-sale condominium project from the beginning, or, as has become the “norm” recently in many jurisdictions, it is to be created as a condominium project with the intent of renting the units for the foreseeable future, but retaining the option to be able to sell them at any time in the future. When first planning the development of a condominium project, it is important to review the local city or county ordinances to see if the conversion of a rental project into a for-sale project is regulated. Many cities have adopted condominium conversion ordinances which make it extremely difficult for a rental apartment project that was not initially approved as a condominium to be converted into a for-sale condominium project.
It was not until the early 1960s that the first condominium statutes were passed.
Every state has some sort of statutory provisions governing the creation and the offering for sale of condominiums. So does every city or county. In some cases, zoning ordinances may preclude the creation of condominiums within certain designated zones. Federal agencies such as FannieMae, FreddieMac and FHA have regulations which impose standards that must be met by any condominium project in which the unit owners are seeking governmental assisted loans.
In addition to the map and the condominium plan, a Declaration of CC&Rs (sometimes referred to as a Condominium Enabling Declaration) is required. State laws require such Declarations to be in a certain form and to include certain provisions. Such laws regulate and restrict provisions to be included in such Declarations. All states have laws regulating the offering of condominiums for sale to the public by the original developer of the condominiums, or by anyone who owns and is offering more than a certain number of condominiums for sale at any point in time.
In those jurisdictions where the creation and the sale of condominiums is heavily regulated, a team effort is required to successfully develop a project. The key members of the team will be the surveyor or engineer who will be creating the map and the condominium plan; the land use lawyer who will be assisting in obtaining the entitlements for the local jurisdiction and from the state regulatory agency; and the title company or independent professional who will be acting as the liaison between the developer and the state regulatory agency responsible for reviewing the project documentation and, eventually, approving the project for sale to the public.
In the case of condominiums being offered for sale interstate, the developer must be aware of and comply with the Interstate Land Sales Full Disclosure Act.
John Hanna, Partner
Address: 525 University Avenue, Suite 600, Palo Alto, California 94301
John Hanna is one of the leading land use lawyers in California. He has represented clients and obtained entitlements for over 3,000 projects. He has also been selected in Best Lawyers, Who’s Who in America, San Francisco’s Best Lawyers, and Silicon Valley’s Best Lawyers.
Hanna & Van Atta is one of the most experienced law firms in California in real estate matters, and the premier law firm in matters pertaining to common interest development in the State of California. The firm is located in Palo Alto and represents commercial and residential developers, land users, and the commercial real estate and home building industries throughout California. Hanna & Van Atta’s three partners offer over 100 years of combined experience as lawyers who have specialised in all aspects of legal representation in the fields of real estate law.