Land Condominiums: A Creative Way to Convey Property Without Subdivision

For the past 30 years, developers of multi-family properties have been able to subdivide their property into individual units which could be conveyed to third parties without the need to obtain subdivision approval. This exception to the subdivision process exists because the creation of a condominium regime is not a change in use but merely a change in ownership. Accordingly, owners of property which cannot be subdivided or which can be subdivided only with great difficulty should be aware that just as a building can be divided into units, unimproved or improved land can generally be divided into "land" condominium units without the need for subdivision approval.

Private Subdivision

The establishment of a land condominium essentially permits a "private subdivision" of property. The owner of a single record lot or parcel can subject the entire lot or parcel to a condominium regime and create within such condominium regime two or more land condominium units.

In many cases, the land condominium units are configured in the same manner as would have otherwise been the case if the property had been subdivided; i.e., each land unit resembles a subdivided parcel and areas such as roadways which otherwise might be dedicated for public use are designated as common elements, for the mutual benefit of all land condominium unit owners.

Land Condominium

The land condominium is established by preparing the fee simple owners and recording a Declaration of Condominium and Condominium Plats among the Land Records. Upon recordation, separate tax identification numbers are assigned to each of the land condominium units and these units can then be conveyed to third parties.

The actual creation of a land condominium regime is not subject to any local government approvals. All development standards and local law requirements which would otherwise exist for the property continue to be applicable to the entire parcel. For instance, access and parking requirements, as well as density and green space requirements, would continue to be applicable and would be applied to the entire site and not to the individual land condominium units that are created within the land condominium.

This creates benefits as well as potential burdens. On the benefit side, development within each land condominium unit can proceed notwithstanding that such development would not otherwise meet the development requirements had the land condominium unit been subdivided as a separate parcel.

The development requirements will be measured based upon the development rights within the entire parcel and not the individual land condominium units. On the other hand, the condominium documents must be carefully drafted to avoid any unintended benefits being conferred upon one land condominium unit owner at the expense of another.

Issues in Creation of Land Condominium

The issues that should be considered with respect to the creation of a land condominium regime include:

  • The configuration of the land condominium units. Since the land condominium units are required to be three-dimensional, upper and lower limits for the land units will need to be determined, as well as perimetrical boundaries. Typically the perimetrical boundaries are established to allow the land condominium unit to be largely self-sufficient. In determining the land condominium unit boundaries, consideration should be given to designating those portions of the property which will serve as common elements. Streets, entry features, stormwater management facilities, and other areas that are intended to be of benefit to the entire site are typically designated as common elements. These common elements are maintained by the condominium association through assessments collected from all land unit owners.
  • The development standards for the property will continue to be applied to the entire parcel and therefore it may be appropriate to have the condominium documents establish "private" development standards and restrictions to avoid development rights which are intended to benefit one land condominium unit from being utilized by another land condominium unit.
  • Consideration must be given to the governance of the land condominium. Typically, a Board of Directors is elected among the unit owners and the Board is then provided certain rights and obligations under the condominium documents, including enhancement of architectural and use restrictions designed to promote external harmony for the entire site. Decisions will need to be made as to the respective voting power to be conferred upon each land condominium unit.
  • The land condominium documents may also be utilized to establish reciprocal easements between the land units. These easements may be for utilities, access, parking, etc.

There are a number of "optional" provisions that can be included within the land condominium documents. If the potential exists for future additional land condominium units, an expandable land condominium regime can be established which permits the condominium regime to be expanded incrementally over a period of up to ten years.

Public Offering Statement Not Needed

If there are no residential uses contemplated within the land condominium, it is not necessary to prepare a Public Offering Statement nor is registration with the Secretary of State of Maryland required. Consequently, once the documents for the land condominium have been drafted and finalized, they can be recorded and the land units conveyed.

Given that formal subdivision may at times be difficult, if not impossible, to achieve, a land condominium can be a welcome alternative when a developer desires to convey portions of an existing parcel or lot.