Parking in Commercial or Mixed-Use Condominium Projects: Common Elements or Unit?

In a commercial or mixed-use condominium project, parking is a hot commodity (at least for the near to mid-term future).  Since parking is an integrated part of the mixed-use condominium project, the developer and their condominium attorney, will need to determine how to characterize the parking within the language of condominium mixed-use.  Below are just 3 of the options that should be considered.

Option 1

Designate the parking area as general common elements under the condominium declaration, which by default means that the parking will be utilized on a “first available basis”, i.e., unreserved. The condominium declaration can reserve the right for the developer to assign specific parking spaces for the exclusive use of units. Usually, and if the plan is to assign parking spaces exclusively to a unit, that parking is first designated as general common element and later assigned to a specific unit by converting the specific general common element parking spaces(s) to a limited common element. The conversion is often done at each unit closing, as opposed to the point of sale to provide marketing flexibility at point of sale.

Option 2

Each unit could encapsulate the parking spaces that are intended to serve the unit. This enlarges each unit in the regime and makes it clear from the beginning which parking spaces belong to which units. Vehicular and pedestrian ingress and egress easements are reserved over drive aisles and walkways as appropriate. This approach is often used when the parking component will be split between uses, e.g., multi-family versus office, or hotel versus for-sale residential. The encapsulation approach provides protection for forward marketability. For example, for the multi-family for-rent component, there is often an expectation of conveyance upon stabilization. Including parking that serves the multi-family use within the multi-family unit will ease disposition of the asset. Encapsulation for an integrated parking garage, will likely require a shared operation and maintenance agreement between the served uses, or designating one uses owner or the condominium association, as the maintaining party.

Option 3

A parking unit may be created if all or portions of the parking facilities will generate revenue, or if there is a desire to control parking or future redevelopment into an alternate use. In such event, the owner of the parking unit would retain open and event parking revenue, and/or parking license revenue. It should be noted that creation of a separate parking unit will create a separate property tax account for the garage unit and will require that the owner of the garage unit operate and administer the unit and manage parking licenses or easements with other units. Obviously, excess revenue or the need for control drives this decision. A separate parking garage unit can also be used to facilitate public financing options, for example, where a city or other regulatory authority will fund construction of the garage and must own the garage as a condition to use of public funds. 

 

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