Mixed-Use Condominiums to be Unlocked by New Law

The condominium form of ownership is a creature of state law. Since the early 1960s individuals and companies have enjoyed the flexibility of developing and owning a “condominium unit”, as created under Chapter 5311 of the Ohio Revised Code.

There are many benefits to developing a condominium. First, a developer is not required to comply with burdensome zoning requirements of Chapter 711 of the Ohio Revised Code. Second, a developer has flexibility in marketing and selling individual units. When a condominium unit is "submitted" to a condominium plan, the unit becomes a separate, independent and transferable parcel of property. The buyer enjoys the financial benefit of owning real estate without the maintenance “headaches” of a typical residential or commercial property. In most instances, the condominium unit owner is only responsible for the maintenance of that “unit”. Usually the condominium association is responsible to maintain the structure of the building and all areas surrounding it, called “common areas”.

To date, most condominiums created under Chapter 5311 were strictly for residential use or commercial use. Mixed-use condominium developments are rare. Recently there is a growing trend toward condominium development for mixed-use purposes. One of the greatest benefits of a mixed-use condominium development is that it enables the developer to diversify its investment. However, existing law hinders such mixed-use projects. As written, Chapter 5311 is cumbersome and restrictive, and compared to other states, Ohio law inhibits developers from having the full flexibility they might desire in the development of real estate. As a result, many developers shy away from developing and constructing a condominium for mixed-use purposes.

Over the past several years there has been a collaborative effort by the Ohio Home Builders Association, the Community Association Institutes in Northern, Central and Southwestern Ohio, and various associations to amend Chapter 5311 in order to make it more flexible. Finally, a proposed amendment to Chapter 5311 has been passed by both the House and Senate and currently awaits the Governor’s signature.

The new law will revise the definitions used in Chapter 5311 and refresh the law to keep up with condominium law in leading states like New York and California. Some of the changes will simplify the re-development of existing residential condominiums, such as the procedures for combining units and changing limited common areas, giving the condominium association boards authority to approve changes in limited common areas. It also relaxes unit owner voting requirements if the association needs to purchase property or amend existing condominium documents to meet evolving, market driven changes in lending and insurance requirements. A key change will permit two tiered assessments so that some costs could be assessed per capita and some by percentage ownership. This is important to developers in mixed-use projects. There are also many changes which will liberalize association board’s rules making powers and simplify meeting procedures. The proposal also clarifies what is required of a developer at the time of turning over control of the association to the unit owners, and improves the association's enforcement mechanisms in the event a unit owner does not pay the assessments. This provides additional certainty for developers and buyers of units in mixed-use projects.

If the amendments to Chapter 5311 are approved by the Governor, developers can expect new flexibility that will foster mixed-use projects.