Commercial Condominium Association Considerations
| Publication year | 1983 |
| Pages | 1090 |
| Citation | Vol. 12 No. 7 Pg. 1090 |
1983, July, Pg. 1090. Commercial Condominium Association Considerations
There is increasing local commercial condominium activity, particularly for office and industrial space. While commercial condominiums share the same concept and appeal as their residential counterparts, they do involve some significant legal differences. The purpose of this article is to explore some of the considerations and alternatives available to the drafting attorney in creating the owner's association and governing documents.(fn1)
The drafting attorney must be sensitive to the unique needs of a commercial condominium project. Standard clauses developed for use in a residential context should not be used without considering applicability. Similarly, documents developed for one commercial project should be thoughtfully reviewed for a subsequent one. Particular problems may arise in definitions or assessment categories. These should be reevaluated for each project to assure relevancy and necessity to the association. Furthermore, the review and purging of unnecessary language may avoid a basis for a claim of misrepresentation against the developer when an item described is not actually made part of the project.
Colorado's Condominium Ownership Act(fn2) is only generally applicable to commercial projects. Substantial exceptions are made for commercial condominiums. Specifically, non-residential condominium projects are exempted from requirements relating to condominium declaration and bylaw contents, and from the requirement of providing a copy of these to prospective purchasers before execution of the contract for sale or closing.(fn3) Also, the section relating to tenant notice prior to project conversion does not apply in a non-residential context.(fn4) These exceptions leave a developer with desirable flexibility in planning and structuring a project. At the same time, however, without the direction of statutory requirements, there is a potential risk for unworkable or unclear documents, or for abuse. Attorneys would be well advised to consider the disclosure provisions of Colorado's condominium law relating to residential documents in advising their developer-clients as to the planning and marketing of the commercial project.
Each commercial condominium project is unique. Some require homogeneity for a success; e.g., a medical or legal project. Others require diversity, such as in the case of a shopping center. Variety may not matter in an office warehouse project. Therefore, initial planning and documentation tailored to the project's character is important.
It is advisable to phase any project where feasible. This enables a developer to choose not to build part of the project, to change product type and to test market. With phased projects, lenders' presale requirements are generally more easily met and commitment fees may be substantially reduced or spread. The developer may also be able to achieve more favorable tax treatment by phasing a project, perhaps by avoiding dealer classification or by controlling the timing of income. In a phased project, special considerations apply---phases must be integrated ultimately and the developer must be made aware of association control alternatives.
While other choices exist, the commercial condominium association is typically created as a non-profit corporation. The basic documents required to create the condominium and its association are the association's articles of incorporation and the bylaws, and the condominium declaration. The drafting attorney should consider using the bylaws, rather than the declaration, as the primary vehicle for setting forth association requirements and procedures, since the bylaws need not be recorded and are more easily amended. Simple, clear documents, having a good balance of specificity and flexibility will go far toward assuring a successful project.
Various considerations apply to the...
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