E-Newsletter Spatial Condominium: A Useful Development Tool

E-Newsletter Spatial Condominium: A Useful Development Tool

Spatial Condominium:  A Useful Development Tool

The spatial condominium did not legally exist as a kind of condominium until the passage of Hawaii’s modernized condominium law in 2006.  Since that time, spatial units have been used as a development solution for all kinds of projects. 

Spatial condominiums are a handy solution for developers of parcels of land that for some reason will not be subdivided or cannot be subdivided.  In some cases, developers need to move forward quickly and cannot wait for completion of the subdivision process, which can be quite lengthy.  In other cases, developers do not want to comply with subdivision requirements, which add additional cost to a project.  In that instance, spatial condominiums serve as a way of creating two or more distinct property interests that may be owned, mortgaged, developed, leased, and sold, separately. 

What is a spatial condominium unit?  Simply put, a spatial unit is a condominium unit that is defined by spatial coordinates rather than by specific physical components, like walls and ceilings.  It is usually defined by lines drawn on a map.  These lines outline the perimeter outer boundaries of what constitutes the unit.  So, for example, the unit may be called out as a plane extending across the surface of the land (or to a certain depth beneath the surface) that connects with a vertical plane that in turn extends to a certain height.   Once established through the recordation of a declaration and map, the spatial unit is created and exists legally. 

So how is this legally created unit used as a practical matter?  In one instance, the developer used it to create a unit, pending subdivision approval, that housed a shopping complex, in order that the project could move forward expeditiously.  Subdivision would take too long, and did not fit the developer’s critical path for development of the project.  Once subdivision was achieved, the condominium project was terminated, and the subdivided lots were conveyed to the respective unit owners.

In another instance, the development plan called for two large buildings to be built on one un-subdivided lot.  Each building would contain different uses, and have its own ownership structure and financing.  In this case, two spatial units were created to permit separate ownership during the development phase, and beyond, to give the developer flexibility to pursue its development plan.  The utilization of improvements such as the parking garage and other project elements would be shared by the owners of the respective units, so reciprocal easements were created to permit such sharing and to also specify the sharing of maintenance costs among the owners.

Spatial condominiums are a very useful tool for developers to enable the achievement of their business plans for a project.  We have only scratched the surface on how this relatively new development tool can be used.

CREATIVE.  SOLUTIONS.

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