In recent years,
mixed-use condominiums have become an important part of the Greater Boston-area
urban and suburban
landscape. Unlike a residential or a commercial condominium,
a mixed-use condominium consists of both commercial and residential units which
may be located within the same building or as separate buildings. One example
is the Millenium Tower in Boston’s Financial District, which comprises a
60-story building with restaurants and a grocery store in the lower floors and
residential units in the remainder of the building. Another example of a mixed-use condominium is
the Maynard Crossing development in Maynard, Massachusetts, which will consist
of a mix of retail, office, restaurant, supermarket and residential buildings.
The co-existence of residential and
commercial units in a mixed-use condominium presents a unique challenge and
opportunity when drafting the governing documents.
ZONING AND USE
At minimum, a
zoning/permitting analysis is essential before creating the mixed-use
condominium. A preliminary review of the zoning ordinances or zoning by-laws
should guide the scope and definitions of the use clause in the Master
Deed. Frequently, permits from the local
zoning board are required and must be obtained before the development and
construction can commence.
The intended use
of the commercial units must be described narrowly and in detail. For example, the Master Deed could provide
that the commercial units may be used for any lawful retail or office purpose,
but not such uses that could adversely affect the residential units, such as a
pet store.
Likewise, the
use of the residential units must be covered separately. Their use should be limited to residential
purposes and perhaps a home office. The
home office should be limited to an accessory or ancillary use, subject to
zoning and ordinance laws, with limited, both in time and frequency, foot
traffic from clients and other business invitees.
A major issue in
mixed-use condominiums is the tension between residential unit versus
commercial unit owners in such matters as use, control, insurance, maintenance
and repairs, and allocation of common area expenses. The Master Deed, Trust, By-Laws and Rules and
Regulations must address, and, when possible, provide concrete resolution
mechanisms for such concerns.
THE TRUSTEES
The Condominium
Trust should provide for both residential unit owner trustees and commercial
unit owner trustees. Two ways to
accommodate and diffuse potential tension in joint governance are: 1)
proportionate representation and/or 2) bifurcation of exclusive authority. In a
building which predominantly consists of residential units, there could be more
Residential Trustees than Commercial Trustees or vice versa. The Residential Trustee(s) can be given the
authority to act without the concurrence of the Commercial Trustees on those
matters reserved in the Master Deed solely for decision by the Residential
Trustees. Likewise, the Commercial
Trustee (s) could be given the authority to act without the concurrence of the
Residential Trustees on those matters reserved in the Master Deed solely for
decision by the Commercial Trustees.
LIMITED COMMON AREAS
The limited
common areas or exclusive use areas of mixed-use condominiums must be defined
clearly. The limited common areas of the
commercial units are different from the limited common areas of the residential
units. The limited common areas of the
commercial units can be referred to as Limited Commercial Common Areas. These would include exterior equipment, pipes
and other facilities serving only the commercial units.
The limited
common areas of the residential units consist of areas that serve only the
residential units, e.g. entrances, stairways, patios, and lobbies. In addition,
there will be common areas that serve the entire building or buildings, such as
the garage of the building or an exterior parking lot.
Because there
are common areas, limited residential common areas and limited commercial
common areas, the Condominium Trust should provide for three budgets and the
Condominium Trustees need the authority to create and adjust these budgets.
BENEFICIAL INTEREST PERCENTAGES
In a mixed-use condominium, percentage interests should be provided as
follows:
- The proportionate interest of a unit in the common
areas;
- The proportionate interest of a unit in the limited
residential common areas; and
- The proportionate interest of a unit in the limited
commercial common areas.
All units,
residential and commercial, have a percentage interest in the common
areas. Only the residential units have a
percentage interest in the limited residential common area. Only the commercial units have a percentage
interest in the limited commercial common areas.
The Massachusetts Condominium Statute, Chapter 183A,
does not address the mixed-use form of condominium ownership. Its hybrid structure is a creative and
instrumental tool in reviving business and residential districts. In addition
to permitting, financing, construction and marketing, carefully drafted
governing documents play a crucial role in making this form of development and ownership
a success.
Co-chair of
REBA’s Condominium Law and Practice Section, Angel Kozeli Mozina is a director
at Rackemann, Sawyer & Brewster, P.C. where she represents developers,
lenders, borrowers, management companies, condominium associations, owners and
tenants in a broad range of real estate and corporate matters. Angel can
be contacted by email at amozina@rackemann.com.
