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Friday, April 5, 2013

What the heck is a “Site Condo”

I often encounter confusion on the part of buyers, who either are not from Michigan or who perhaps haven’t been in the market for 20-30 years, about the different types of properties that I might be showing them. Michigan has at least one totally unique class of properties that you won’t find in any other state – the site condo.

Most people are familiar with the platted subdivision. Until the mid-1980’s that was one of the only ways that developers and builders could develop a property with multiple individual dwelling units. There also were a number of variants for developing multi-family units, either as apartments, condos or co-ops. I’ll discuss each of those in future articles. One important thing to remember about all of these types of properties is that each has its own set of laws and rules that the builder and owners must follow.

Until the mid-1980’s all builders who wanted to create subdivisions of single family homes had to go through the process of getting the plat (the layout of the individual lots) approved and follow all of the rules that had built up over time to govern those developments. Homes in those subs were wholly owned by the buyers – lot and house, inside and out. There were normally fairly rigid and strict rules about the size of lots, the closeness of houses to one another and the building standards (local building codes) that had to be met for the houses and the design and construction standards for the roads within the sub. The issue of the roads was a big one, since the roads were normally turned over to the local governing body (Township, Village or City) for future maintenance. Those local governments set the standards for the how the roads had to be designed and built. They also set up procedures for doing things like environmental impact studies and holding neighborhood hearings about the proposed project, that had to be followed and much more.

By the mid-1980 the process that a developer had to go through in order to do a platted sub had become onerous and time consuming. It often took a year just to get the necessary permissions to begin the development. Builder looked around for relief from the platted sub processes and found it in Michigan’s Condo laws and rules. Condo complexes were a newer type of multiple unit dwelling and more governed by laws and rules that were also more modern. One major difference was in the roads within a condo complex. They are designed to be private and to remain private upon completion of the complex.  Maintenance of those roads is planned into the long term maintenance plans for the complex and are the responsibility of the condo homeowners association, along with exterior maintenance and maintenance and insurance for any common elements like pools or parks or entrances (gates, islands, etc.).

Sometime in the mid-1980’s builders determined (I’m sure with the blessing and help  of the political powers at the time) that they could build the equivalent of a subdivision in a lot less time and with a lot less hassle by building under the Michigan Condominium laws and rules. The Condominium Law was enacted in 1978 and amended in 1983. Developers found that they could use that law to achieve much greater flexibility for the layout of the houses and the design of the roads by keeping the roads private and also creating shared areas the ownership of which would be retained by a homeowners association. The condominium law also laid out a much faster process for development approval. So, the Michigan “site condo” was born by redefining a “unit” within the condo complex to include the land and the house that is built on it. So, in a site condo complex the individual owners own the land that their house sits upon and the house itself; further they are totally responsible for the upkeep of both. The owners land and houses are considered to be units within the complex; and so, they required to be members of the Homeowners Association (HOA), which “owns” and is responsible for the roads and any common areas.

The site condo is sort of like taking the concept of a detached condo (which had been around for a while) one step further – now you own your own lot too. The rules for the site condo are in the Master Deed and take the form of By-Laws for the HOA. In most cases those rules are broad and fairly detailed in terms of what the homeowner may and may not do with or to his property without permission from the HOA. Things like paint colors for the house, additions to the house, putting in a swimming pool and any other things that is likely to have impact on the value of the whole neighborhood are governed under those rules. Some find that to be intrusive and onerous, but most find it to be comforting that the values in the neighborhood are less likely to be impacted by a rouge owner.

What other impacts are there for owners from living in a site condo, rather than in a plated sub?

One difference that was not recognized, even by by the builders, for a while is the requirement that condo complexes fill out special registration forms with the Veterans Administration certifying that their complexes do not discriminate, especially against vets. Many builders just didn’t do the paperwork when they were building and now find that veterans cannot use their VA benefits to buy one of their units. There is no way to recover if the paperwork was not filed when the complex was being built. Another issue sometimes comes up when buyers are trying t use out of state banks for financing. Since Michigan is the only state with this unique property type, many out of state banks don’t know what to make of it. They see the work Condominium in the legal description and immediately think of the traditional condo complex. It confuses them and many have more stringent lending practices for condos than for regular houses. That shouldn’t be an issue if you deal with local banks or mortgage lenders.

Should I avoid site condos?

There’s little chance that you will be able to in Michigan, unless you buy an older home. Almost all of the homes built after the mid-1980’s are site condos.

So, now you know what a site condo is. I deal with them all of the time. If you’re looking to buy in this area give me a call and we’ll find you just the right site condo to meet your needs.

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