Is it a Condominium, Planned Community or a Subdivision?
The Pennsylvania General Assembly has recently returned a useful tool to real estate developers and builders. At the same time, they have allowed the residents and developers of over 10,000 condominium and homeowners’ associations throughout Pennsylvania to breathe easy. Senate Bills 687 and 688 were recently signed into law by Governor Wolf. These Bills make it absolutely clear that the creation of a condominium or a planned community is not a subdivision. These Acts also make it clear that selling units in a condominium or planned community is also not a subdivision. This is a great tool for real estate developers. It also puts to rest doubts that many of the estimated 2.8 million Pennsylvania residents living in condominium or planned community associations have about the title of their properties.
In October 2008, the Commonwealth Court of Pennsylvania decided the case of Shaffer Family Limited Partnership v. Zoning Hearing Board of Chanceford Township. In that matter, the Shaffer Family Limited Partnership owned 25 areas of vacant land. Shaffer received permission to construct a single-family dwelling on the property. A year later, Shaffer created a planned community that divided the property into three parcels: a one-acre unit containing the house, a 22-acre unit of vacant land, and two acres of common open space between the two. Chanceford Township believed that this was an illegal subdivision, and pursued a violation of the Township’s Subdivision and Land Development Ordinance. The Commonwealth Court ruled that Shaffer’s actions were a subdivision of the property. The Court confused the issue even more by hinting that creating an identical condominium might not create a subdivision.
Shaffer hurt developers’ ability to develop residential or commercial property. Prior to the Shaffer decision, a developer could create a planned community or condominium on land that had already gone through land development or subdivision approval. The developer did not need to go through municipal land development or subdivision approval. This would allow the developer to convey different parts of the project to different people. This could range from something expensive and complicated, such as dividing the Lancaster County Convention Center into four separate condominium units. Or it could be something as simple as dividing an Amish farm between a business and the remainder of the farm. Then the developer could sell, mortgage, lease, etc., the units separately. After the Shaffer decision, developers could not be certain if a municipality would bring an enforcement action in these situations, and purchasers of these parcels could not know if they owned a legally-created unit. Even if developers moved forward with a project, they sometimes used a condominium form, when a planned community (there is a difference, and it is too detailed to explain here) would have been the better choice.
The passage of Bills 687 and 688 gives real estate developers a tool for development and clarifies the uncertainty created by Shaffer. It allows developers to create a condominium or planned community to divide a piece of property without going through municipal approval, and without worrying that the municipality is going to object to the project years after the fact. This has many real-world examples. For example, consider a duplex home sitting on a single lot. Today, the developer could create a planned community or condominium and separate the sides of the duplex. By creating two separate units, the developer can sell one or both of the units with fee simple title. The same principle applies for a commercial office building, a strip mall, a farm with business use or two dwellings, or many other scenarios.