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When Do I Need a Michigan Residential Real Estate Development Attorney?
Developing and purchasing Michigan residential condominiums is a process that requires extensive amounts of planning and preparation. Residential developers looking to create condominiums must take many factors into consideration when planning and executing a condominium project; including abiding by the rules and regulations defined under the Land Division Act, Michigan Condominium Act, and residential condominium special requirements when it comes time to sell the units. With so many variables factoring into the overall process, it is advised to first consult with a Michigan residential real estate development attorney. A qualified residential real estate development attorney can represent the interests of builders and developers through preparing the necessary master deed, condominium bylaws, drafting HOA Bylaws, or HOA declarations. Additionally, a real estate development lawyer can assist in obtaining necessary governmental approvals. If you are considering creating a new residential development, a residential real estate development attorney can protect your interests and rights throughout the process.
What Are the Differences Between a Michigan Site Condominium and a Platted Subdivision?
Michigan site condominiums and lots within a platted subdivision may appear virtually the same, however, there are differences between the two. “Comparison Between Michigan Site Condominiums and Platted Subdivisions (Homeowner Associations)” outlines the similarities and differences, stating that:
A site condominium is established by recording in the records of the county in which the land is located a master deed, bylaws and condominium subdivision plan (“plan”). A platted subdivision is created by the recording of a subdivision plat (“plat”), usually coupled with a declaration of easements, covenants, conditions and restrictions The plan depicts the condominium units and limited and general common areas, while the plat defines the lots. Both have substantially the same geometrical appearance and characteristics. The master deed and bylaws on the one hand and the declaration on the other have essentially the same functions with respect to the site condominium or platted subdivision, namely, establishment of:
- building and use restrictions;
- rights of homeowners to use common areas;
- financial obligations of owners; and,
- procedures for operation of the subdivision
While Michigan site condominiums and condominiums located within a platted subdivision developments may both be sold to individual owners, each property type is governed by a different statute. A condominium located within a platted subdivision must conform with the Michigan Land Division Act due to the individual ownership of both the condominium unit and the plot of land in which the unit is built upon. The necessary approvals for a condominium developed within a platted subdivision are much more detailed under the Michigan Land Division Act, resulting in most new single-family home developments being proposed and recorded as site condominiums governed under the Michigan Condominium Act.
A Hirzel Law, PLC residential real estate development attorney can assist with deciding whether a site condominium or platted subdivision is the preferable form of residential development.
How Does a Residential Developer Create a Condominium in Michigan?
The Michigan Condominium Act, MCL 559.101, et seq., is a key component which should first be referenced when planning and creating any Michigan condominium. The Michigan Condominium Act states its purpose as:
“AN ACT relative to condominiums and condominium projects; to prescribe powers and duties of the administrator; to provide certain protections for certain tenants, senior citizens, and persons with disabilities relating to conversion condominium projects; to provide for escrow arrangements; to provide an exemption from certain property tax increases; to impose duties on certain state departments; to prescribe remedies and penalties; and to repeal acts and parts of acts.”
Before construction of the condominium project or recording of a master deed even begins, a Michigan residential developer must provide written notice of the proposed action of the project. Section 559.171 of the Michigan Condominium Act states that the notice of proposed action must be provided to the following:
(a) The appropriate city, village, township, or county.
(b) The appropriate county road commission and county drain commissioner.
(c) The department of environmental quality.
(d) The state transportation department.
It is especially important to note that under section 559.171 of the Michigan Condominium Act, the notice of proposed action must be provided to the aforementioned government entities not less than 10 days before recording the master deed for a project. Section 559.172 of the Michigan Condominium Act continues that:
(1) A condominium project for any property shall be established upon the recording of a master deed that complies with this act.
(2) Except as provided in section 88, a condominium unit shall not be sold by or on behalf of the developer before a master deed is recorded for the condominium units in the project.
(3) Title to a unit and common elements is not rendered unmarketable or otherwise affected by reason of an insubstantial failure of the master deed to comply with this act. Whether a substantial failure of the master deed to comply with this act impairs marketability is not affected by this subsection.
The master deed essentially outlines bylaws and condominium subdivision plan for the project. Section 559.108 of the Michigan Condominium Act further elaborates on the definition of “Master deed”, stating that the master deed shall include:
(a) An accurate legal description of the land involved in the project.
(b) A statement designating the condominium units served by the limited common elements and clearly defining the rights in the limited common elements.
(c) A statement showing the total percentage of value for the condominium project and the separate percentages of values assigned to each individual condominium unit identifying the condominium units by the numbers assigned in the condominium subdivision plan.
(d) Identification of the local unit of government with which the detailed architectural plans and specifications for the project have been filed.
(e) Any other matter which is appropriate for the project.
Whether the goal of a Michigan residential real estate project is to create an attached condominium or a site condominium, the residential real estate development attorneys at Hirzel Law, PLC have extensive experience advising throughout the residential real estate development process. From preparing or reviewing the master deed to assisting with the creation of plats, the Hirzel Law, PLC residential real estate development attorneys can help at any step of the process.
What Are the Special Requirements That a Residential Condominium Developer Needs to be Aware of Before Selling Condo Units?
While a qualified residential real estate development attorney will have the best understanding of all the special requirements that precede the sale of a condo, there are five key documents every developer must prepare or provide in accordance with section 559.184a of the Michigan Condominium Act before preparing to sell a condominium unit:
- A purchase agreement
- The recorded master deed for the condominium (MCL 559.184a(1)(a))
- A copy of the escrow agreement (MC 559.184a(1)(b))
- A condominium buyer’s handbook (MCL 559.184a(1)(c))
- A disclosure statement
Failure of a residential condominium developer’s preparation of these documents will surely pose challenges when it comes time to sell. The specifications of each document may be referenced in “Checking the List Twice: Buying a Condominium Unit in Michigan During the COVID-19 Pandemic” and “What is a Disclosure Statement and What is Required?”, however, each document must include particular language and statements derived from the Michigan Condominium Act which is why it is strongly advised to consult with a qualified residential real estate development attorney to prepare the documents that are needed to sell units in a new construction condominium.
Once the notice of proposed action is provided to the appropriate government entities, the master deed for the initial phase of the project is recorded, and all other necessary documents are prepared, section 559.188 of the Michigan Condominium Act states that it is only then that the condominium developer may offer the unit for sale if all the following also occur:
(a) The condominium unit is one which the developer may properly include in the condominium project.
(b) There is a site plan showing the location of the unit.
(c) A substantially identical condominium unit was already included within the project or plans for the condominium unit which describe the physical characteristics of the unit exist and are appended to the purchase agreement.
(d) The purchase agreement states that the condominium unit shall be conveyed to the prospective purchaser within 1 year after the execution of the purchase agreement. If conveyance is not made within that time the agreement is voidable under the conditions set forth in the agreement.
(e) Within 6 months after the date the purchase agreement becomes binding, an amendment to the master deed is recorded which includes the unit.
A residential developer may also grant a preliminary reservation agreement with a potential buyer if all the above requirements are met. Section 559.109 of the Michigan Condominium Act defines a preliminary reservation agreement as, “. . . an agreement to afford a prospective purchaser an opportunity to purchase a condominium unit for a limited period of time upon sale terms to be later determined.”
Contact a Hirzel Law Land Use Lawyer Today
If you are a builder, developer, or successor developer, the residential real estate development attorneys at Hirzel Law, PLC can provide you with peace of mind through the education and representation of developer obligations and rights. We stand by our clients, offering quality legal representation and promptly responding to our clients’ needs. Contact Hirzel Law online or call 248-986-2921 (Farmington) or 231-486-5600 (Traverse City) or 616-319-9964 (Grand Rapids) to learn how our Michigan residential real estate development attorneys can help.