Mixed-Use and the Lead Unit Approach: I Can Do This Better Than You

In a typical condominium regime, the maintenance of each unit is performed by the unit owner, and the maintenance of certain shared components or facilities (i.e., common elements) is performed by the condominium association. The “Lead Unit Approach” is where a specific unit owner undertakes maintenance of certain shared components or facilities. The “Lead Unit” is the specific unit within the project, based upon the owner or operator’s expertise and on-site personnel, which may be in a better position to perform maintenance than the condominium association. For example, in a vertical mixed-use project with a multi-family for-rent unit and a retail unit, the multi-family owner or operator will likely have on-site maintenance staff and a superintendent who can perform some services to shared components or facilities. Rather than duplicate efforts at the condominium association level, a decision is made to leverage use of the Lead Unit expertise and on-site staff to perform specific common element maintenance services.  

If the Lead Unit approach is used, the condominium declaration will allocate maintenance responsibility with a corresponding cost allocation to the Lead Unit and other supported units.  The supported units would pay their proportionate share of costs to the Lead Unit owner.  Budgeting requirements, caps for controllable costs, and audit and review rights can be incorporated into the condominium documents to provide appropriate transparency and disclosure to the supported units. The Lead Unit Approach is an option in the right circumstance, which may not be “right” even if efficiencies in administration and costs can be realized. The net effect of the Lead Unit approach is to minimize or eliminate the authority and oversite of the condominium association, at least as it pertains to the maintenance functions assigned to the Lead Unit. Minimizing condominium association authority and oversite may create headwinds on a sale of any of the supporting units since the Lead Unit functions will be performed by a private party and will not require the participation or input of supporting unit owners, at least as compared to if those decisions were made by the condominium association.

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