[WSBARP] Separate Duplex Condos
Pete Middlebrooks
pete at jcmiddlebrooks.com
Wed Sep 14 12:26:13 PDT 2016
John,
1. If you would like to discuss further the issues you have raised, contact me off-line -
Ø The majority of my projects are in the urbanized King/Snohomish Counties.
Ø But, I have done many condominiums in Eastern Washington (most recently Chelan).
2. My practice for many years has focused on creating subdivisions (attached and detached) and condominiums (attached, detached and multifamily).
3. As Jim suggests, the subject of terminating the duplex condominiums raises a number of complex issues - involving the subdivision vs. condominium forms of ownership.
Ø Terminating the condominium is the easy part.
Ø But, then to sell individual homes pushes you down the subdivision path - which may not be viable.
4. The following is "long-winded" - I pulled this from one of my seminar manuals.
5. CONDOMINIUMS.
a. Creation
1) Governed by the Washington Condominium Act ("WCA", RCW 64.34), a unified state statute the same for all cities and counties, and not regulated by local ordinances.
2) Merely creates a form of ownership, and does not affect local zoning, building and related codes.
3) Created by simultaneously recording of a condominium Declaration ("CC&R's") and Survey Map and Plans.
4) Upon recording, legal description of entire site replaced by reference to the Units - each recognized as a legal parcel.
5) Upon recording, tax account for the entire site is killed, and replaced with separate tax accounts for the Units.
b. Termination
1) Record a Termination document [I have a 1-page template available].
2) Not subject to local governmental review and approval.
3) Upon recording, condominium is terminated.
4) Upon termination, legal description reverts to a description of the entire.
5) Upon termination, tax accounts for Units are killed, and replaced with a single tax accounts for the entire site.
6. SUBDIVISIONS.
a. Creation
1) Governed by the
a) Subdivision Statute (RCW 58.17), as implemented and controlled by local subdivision ordinances; and
b) Homeowner Association Act (RCW 64.38).
2) Merely creates a form of ownership, and does not affect local zoning, building and related codes.
3) Created by recording of a subdivision Plat Map
Ø NOTE: comprehensive Declaration ("CC&R's") are not required, but highly recommended.
4) Upon recording, legal description of entire site replaced by reference to the Lots - each recognized as a legal parcel.
5) Upon recording, tax account for the entire site is killed, and replaced with separate tax accounts for the Lots.
b. Termination
1) Can be done, but involves a time-consuming and complex process.
2) Subject to local governmental review and approval.
3) Upon following the subdivision requirements, the subdivision is terminated.
4) Upon termination, legal description reverts to a description of the entire site.
5) Upon termination, tax accounts for Lots are killed, and replaced with a single tax accounts for the entire site.
7. SUBDIVISION AFTER CONDOMINIUM TERMINATION.
a. Terminating the condominium results in a single parcel containing multiple dwellings that can be rented.
b. But providing separate ownership of the individual dwellings then requires going through the subdivision process.
c. Problems With Subdivision -
1) Uncertainty - assuming compliance with building and related codes, the subdivision process affords ill-defined discretion to staff, hearing examiner/planning commission, and city/county councils.
2) Costs - substantial governmental and professional fees.
3) Time Delay - exceedingly long processing time.
4) Density Loss - Subdivision requirements can result in a 10% to 50% loss of allowable density -
Ø Minimum Lot size, maximum Lot coverage, minimum structure setback from Lot line, etc.
8. AIRSPACE CONDOMINIUM SOLUTION.
a. To avoid the problems with antiquated subdivision laws is why the WCA provides for the "Airspace" condominium.
b. The Unit boundaries are not based on physical features - e.g., interior surface of perimeter walls, floor and ceiling.
c. The Unit boundaries are surveyed planes - no different than how we create subdivision Lot boundaries.
d. The Unit includes the entire structure, yards, air above and dirt below the structure - the legal and functional equivalent of a subdivision plat.
e. The creation of a single family (attached or detached) airspace condominium is not subject to local control and avoids the subdivision problems.
9. AIRSPACE CONDOMINIUM PROBLEMS.
a. Real Estate Broker/Agent Resistance
1) Many (most ??) brokers and agents (particularly outside of the urban areas of King/Snohomish Counties) do not understand the airspace condominium concept.
2) Solution - getting a real site-sale broker "pro" and "education" (for example) -
Ø "Summary of Project Documents" - 2-page "layman's" language answers to "FAQ's"; demonstrates that project is not different from subdivision.
Ø "Subdivision/Condominium Comparison Chart" - 1-page demonstrating ownership attributes are the same.
Ø "Broker/Agent Memo" - 1-page outlining documents to use and procedures to follow.
b. Lender Resistance.
1) More lenders are willing to provide buyer financing for subdivisions than airspace condominiums
2) Solution -
Ø From the outset, get a "lead" lender who is prepared to provide financing to credit qualified buyers.
Ø The "lead" lender may not be the lender you would have used on a subdivision, but "lead" lenders are available.
c. GSE Requirements.
1) FannieMae/FreddieMac/FHA/VA currently impose various underwriting requirements on single family condominiums that are not now (but were) imposed on subdivisions -
Ø Presale requirement, Owner Occupancy requirement, Completion of Improvements requirement, etc.
2) Solution -
Ø As authorized by the WCA, create the multi-phase "expandable" condominium.
Ø Start with only a few Units, then add more Units as sales progress - the condominium "expands".
Ø Requires a high degree of coordination with construction and marketing.
Ø The expandable condominium can trigger a subdivision problem that has to be avoided - Master Condominium (with Subcondominiums) or binding site plan.
Ø I am not sure why 3 separate duplex condominiums were created rather than a single "expendable" condominium.
d. WCA Implied Warranty
1) No statutory warranty for subdivisions - but all of my clients to provide a comprehensive warranty (although not as expansive as defect lawyers want).
2) But the WCA does impose the "Implied Warranties of Quality" on all condominiums - including single family detached and attached projects -
Ø Cannot be avoided by general disclaimer.
Ø As a result of amendments, use of traditional "performance standards", and other traditional warranty provisions is debatable.
Ø Insurance motivated and insurance funded litigation is often the result.
3) However, I have not had defect litigation on my single family airspace condominiums - that is a subject for another "dissertation".
e. Builder's Insurance
1) The developer, contractor and subcontractors may not be able to obtain traditional "builders" insurance if a condominium is involved (even single family).
2) This requires obtaining a "Wrap" policy - more complex to obtain and more expensive.
10. CONCLUSION
a. There is not a homebuilder I represent that wants to use the airspace condominium concept (rather than a subdivision).
b. But, it is the price you pay if you want to avoid the "subdivision" problems.
c. And, it is not for the "faint" hearted - and the "development team" (developer, contractors, real estate brokers, surveyor and project lawyer) have to work together.
Law Office of James C. Middlebrooks
Pete Middlebrooks (Attorney)
3050 Belmonte Lane, Everett, WA 98201
Email: Pete at jcmiddlebrooks.com<mailto:Pete at jcmiddlebrooks.com>
Pete Tel.: 425-252-2693
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From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of James L. Strichartz
Sent: Wednesday, September 7, 2016 9:55 AM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Separate Duplex Condos
The other issue you need to consider is whether you need to subdivide the units or buildings into separate parcels which can sometimes be a challenge. Avoiding the subdivision process is often the reason that the condominium form of ownership has been employed.
Jim Strichartz
Attorney
Fellow, College of Community Association Lawyers
Law Offices of James L. Strichartz
201 Queen Anne Avenue North, Suite 400
Seattle, WA 98109-4824
jim at condo-lawyers.com <mailto://jim@condo-lawyers.com/>
http://www.condo-lawyers.com<http://www.condo-lawyers.com/>
http://www.linkedin.com/in/condolawyer
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From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Scott Hildebrand
Sent: Wednesday, September 07, 2016 8:30 AM
To: 'WSBA Real Property Listserv'
Subject: Re: [WSBARP] Separate Duplex Condos
In the condo act (64.34) there is a process for uncondominiumizing an existing condo. I a m led to believe the process is very straightforward- a few declarations and you're done. The tricky part- at least on this side of the state- is working with the assessor to get your new parcels. Other than that, it seems to be smooth sailing.
Best,
Scott Hildebrand
Attorney at Law
206-605-8874
From: wsbarp-bounces at lists.wsbarppt.com<mailto:wsbarp-bounces at lists.wsbarppt.com> [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of John L
Sent: Tuesday, September 6, 2016 5:06 PM
To: wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] Separate Duplex Condos
List mates,
I have clients who own condominiums composed of four separate condo associations for each of four duplexes. In other words, each duplex is a separate condominium. Each condo owns a portion of the common private road that services the condominiums. They would like to eliminate the condominiums as they are having great difficulty getting loans on their codo units, among other problems. Has anyone encountered this before and if so, what is the best way to unwide the individual condominiums?
Thank you.
John H. Loeffler
8414 N. Wall, Suite A
Spokane, Wa 99208-6171
Phone: 509.467.6767
JohnL at Ollps.com<mailto:JohnL at Ollps.com>
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