Michigan utilizes a variety of land use laws and the delegation of certain authority to local governments to regulate the development and use of land while also fostering creativity and innovation among developers and local governments. Condominium Developments and Planned Unit Developments are two different types of approaches which can be used together to create a vibrant community to live, work, and play. It is important, however, to recognize the differences between these two concepts and to understand the role each plays in a particular development. In general, a Condominium Project is created so as to layout the physical boundaries of the intended development. Each Condominium Project requires a master deed, a condominium subdivision plan, and condominium bylaws which together describe the physical dimensions of the land within the Project and govern the relationship between co-owners. A Planned Unit Development, though also a development of land, is generally used to obtain approval from a locality for the use(s) to which the land is intended. Ordinarily PUD approval would be sought when the intended use does not fit within the confines of traditional zoning principles.
Euclidean Zoning and the Michigan Zoning Enabling Act
Historically, Michigan land use principles were based upon Euclidean Zoning, sometimes called single-use zoning, which separated land uses by type of use, and grouped land uses of the same type together. The Euclidean Zoning principles set forth in Michigan’s county, township, and city and village zoning enabling acts (now in the current Michigan Zoning Enabling Act) complemented separate rules regarding the orderly division of land contained in the Plat Act of 1929, 1929 PA 172, formerly MCL 560.1, et seq., and then in the Land Division Act of 1967, 1967 PA 288, MCL 560.101 et seq. In general, the orderly structure of land under these various statutes contemplated that a development would have a single type of use, and that independent and separate lots would be created within that development that would each have that same type of use.
Development of Michigan Law:
the Condominium Act and Planned Unit Developments
In the late 1970’s two different statutes were enacted that released developers and communities from the confines of Euclidean Zoning and increased opportunity for innovation and creativity in land development. In 1978 the Michigan legislature enacted the Condominium Act, 1978 PA 59, codified at MCL 559.101, et seq. The Condominium Act provides a means for developers to allocate land and building ownership within a particular Condominium Project. The Condominium Act provides a legal framework for developers to create structures close to one another with multiple (or single) ownership, to create common areas available to all co-owners of the Condominium, and for co-owners to share maintenance costs. It can be used for residential, commercial, or industrial land uses. The Condominium Act provides a flexible means of land division that would be more cumbersome if it were attempted under the Land Division Act.
In 1979, the Michigan legislature amended the then-existing zoning enabling acts to authorize localities to approve Planned Unit Developments (“PUD”). PUD authority is a means by which a locality may authorize and regulate the use of land within a proposed PUD development. It is less targeted towards the physical boundaries of the development as it is the use intended for the development. The legislature carried PUD authority over into the current Michigan Zoning Enabling Act in 2006 when it consolidated the county, township, and city and village zoning enabling acts. See MCL 125.3503. The enacting statute authorizes a locality to apply PUD authority to “regulations relating to the use of land, including but not limited to, permitted uses, lot sizes, setbacks, height limits, required facilities, buffers, open space areas, and land use density.” MCL 125.3503(3). A PUD development has the potential to be a significant departure from property developed under traditional Euclidean Zoning. The enabling statute itself states that a municipality may “permit flexibility in the regulation of land development, encourage innovation in land use and variety in design, layout, and type of structures constructed . . . .” MCL 125.3503(2). In addition, the statute provides examples of potential PUD developments which include “cluster zoning, planned development, community unit plan, and planned residential development . . . .” MCL 125.3503(1). There is no specific requirement that a PUD be limited to a single residential, commercial, or industrial land use.
PUD and Condominium Developments:
Benefits to Developers and Communities
Because of their flexibility, PUD and Condominium Developments offer tremendous potential for developers to create innovative projects sought by communities, prospective residents and retailers. For example, PUD and Condominium Developments could assist a developer seeking to tap into the market for homebuyers concerned with a community’s “walkability.” In June 2015 the Center for Real Estate and Urban Analysis at the George Washington University School of Business released a report which analyzed the walkability of a number of metro areas in Michigan. See Christopher B. Leinberger & Patrick Lynch, The WalkUP Wake-Up Call: Michigan Metros, George Wash. Univ. Sch. of Bus. (June 23, 2015). This Report found a “pent-up demand” for walkable areas:
Across all the Michigan Metros analyzed, average office rents in regionally significant walkable urban places are two percent higher than in comparable drivable locations, retail rents are 13 percent higher, multifamily rental apartment rates are 28 percent higher, and for-sale residential prices are 50 percent higher. These are crude averages that hide significant variation among and within metro areas, but the broad implication is clear-there is pent-up demand for walkable urban places in Michigan.
Report, p. 5.
PUD and Condominium Developments offer a potential means for developers to meet this “pent-up demand” because a PUD and Condominium together can help create the type of mixed-use development often sought by those concerned with walkability. For example, a single PUD development could contain a variety of uses including residential, retail, and office. In an urban setting, a particular PUD development could contain a single building with retail on the first floor, office units on the second floor and residential units on the third floor. By regulating setbacks, height limits, and design standards of the building itself, the PUD approval process could be used to implement principles of Congress for the New Urbanism and the Form Based Code Institute— organizations which are generally considered to encourage “walkability.” A Condominium Project could also be created as part of the PUD to govern the relationship between co-owners within the Project. Again, approval of the PUD would constitute approval of the proposed use of the land within the project, and any Condominium Project within the PUD would establish the legal framework governing the relationship between unit co-owners. In such a setting PUD approval and the Condominium structure together would provide both flexibility in development planning, and stability once the development is created. It is important, however, that any developer seeking to use the PUD approval process recognize the differences between PUD approval and a Condominium.
Summary
Standing alone, the PUD authority for land use granted by the Zoning Enabling Act and the type of land divisions permitted under the Condominium Act are targeted towards separate issues. When used together, however, they can complement one another and be an integral part of innovation in real estate projects. Through its PUD authority, for example, local governments can encourage and foster the types of mixed-use developments often sought by homebuyers and retailers, especially while there is a “pent-up demand” for walkable living. At the same time, through the legal framework created under the Condominium Act, developers can instill a stability that will enable the project to thrive for years into the future.
Matthew W. Heron is a Member of Hirzel Law, PLC where he focuses his practice on dispute avoidance, condominium law, commercial litigation, commercial real estate, land use, large contractual disputes and title litigation. He has extensive litigation and trial experience in state and federal courts involving commercial litigation issues and real estate matters. Mr. Heron concentrates his practice on drafting, revising, amending, restating and interpreting governing documents of condominium and homeowner’s associations in Michigan. He can be reached at (248) 478-1800 or mheron@hirzellaw.com. You can also follow him on Twitter at @mwheron75.