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has a stock ownership and the corporation form of organization is used. In the condominium the occupant obtains a fee simple title to his interest. By planes, horizontals, verticals and so forth the surveyor delineates the location of this real estate even though, in a sense, it is only a cube of space. Each apartment or unit then becomes a real estate entity.
Condominium has a flexibility which permits individual financing, and an individual purchaser can either pay cash for his unit, obtain a conventional loan, or an FH A-insured loan, and he will have freedom in repaying the loan or in making whatever financial arrangements he desires.
There are restrictions on the resale of units in cooperative projects, but in the condominium program there is no restriction on the resale of the individual unit. The member is free to sell his unit or lease it on such terms as he deems best. It may be that the condominium association will want to have some type of screening of owners and the FHA will give consideration to such proposals, so long as they do not discriminate on the basis of race, creed, or color.
The condominium involves a real estate transaction, whereas cooperatives involve a stock or membership transaction. When it comes time to transfer ownership, although the member of the condominium has freedom in setting the selling price, etc., he is subject to the technicalities and expenses of a real estate transaction, title searches, preparation of deeds, etc.
The bill which the real property law committee drafted and which the board of directors of the association approved, is in some respects a composite of the best features from the bills from the several States which have already enacted the legislation and under which the operation of condominium projects has been found to be functional, with particular reference to the provisions of section 234 of the Federal Housing Administration Act of 1961.
The condominium plan contemplates that each unit owner or successive owner automatically becomes a member of the association of owners; upon sale of a unit by an owner, his membership terminates and the new owner automatically becomes a member of the association. Members' voting rights in the association are determined by the percentages which their original unit cost bears to the total cost of the whole condominium project. Thus, if an individual owns a unit valued at a total of 10 percent of the value of all the units, he would also possess 10 percent of the total voting rights in all matters affecting the operation and management of the project, except its dissolution. This is distinguishable from the cooperative projects where a cooperative member is usually entitled to only one vote in the affairs of the corporation, regardless of the value of the unit which he occupies.
Time will not allow me to discuss in detail all the provisions of the pending legislation, but a word or two about the principal provisions may be in order. The definitions on pages 1 through 4 of the act are self-explanatory and standard, except section 2 (a) through (f).
(a) “Unit” or “condominium unit” means an enclosed space, consisting of one or more rooms, occupying all or part of a floor in buildings of one or more floors or stories regardless of whether it be designed for residence, for office, for the operation of any industry or business, or for any other type of independent use, and shall include such accessory units as may be appended thereto, such as garage space, storage space, balcony, terrace, or patio: Provided, That said unit has a direct exit to a thoroughfare or to a given common space leading to a thoroughfare.
(b) “Condominium” means the ownership of single units in a multiunit structure with common elements;
(c) “Condominium project” means a real estate condominium project; a plan or project whereby five or more apartments, rooms, office spaces, or other units in existing or proposed building(s) or structure(s) are offered or proposed to be offered for sale;
(d) “Coowner” means a person, persons, corporation, trust, or other legal entity, or any combination thereof, that owns a condominium unit within the building;
(e) “Council of coowners” means all the coowners as defined in subsection (d) of this section; but a majority, as defined in subsection (h) of this section, shall, except as otherwise provided in this act, constitute a quorum for the adoption of decisions;
(f) “General common elements” except as otherwise provided in the plat of condominium subdivision, means and includes:
(1) The land on which the building stands, whether leased or in fee simple;
(2) The foundations, main walls, roofs, halls, columns, girders, beams, supports, corridors, fire escapes, lobbies, stairways and entrance and exit or communication ways;
(3) The basements, flat roofs, yards and gardens, except as otherwise provided or stipulated;
(4) The premises for lodging of janitors or persons in charge of the building, except as otherwise provided or stipulated;
(5) The compartments or installations of central services such as power, light, gas, cold and hot water, heating, central air conditioning and/or central refrigeration, swimming pools, reservoirs, water tanks and pumps, and the like;
(6) The elevators, garbage incinerators, and, in general, all devices or installations existing for common use; and
(7) All other elements of the building rationally of common use or necessary to its existence, upkeep, and safety.
Sections 3 and 4 provide that once the regime is established, the individual units may be conveyed, leased or encumbered, may be inherited and devised by will, the same as any other real estate.
Under section 5 title can be held like any other real estate, by joint tenancy, tenancy, tenancy in common, tenancy by the entirety, or individually.
Section 6 creates fee simple ownership and a common right of ownership with the other coowners of an undivided fee simple interest in the common elements of the property, such as the ground, the walls, the roof, stairways, elevators, electrical fixtures, etc. The individual percentage of ownership in the common elements depends, of course, upon the relationship which the particular unit bears with reference to all the other units as far as size, location and price factors are concerned. This share interest cannot be changed and is set forth in the records.
Under section provision is made that once the condominium regime is established, the common elements are indivisible and cannot be destroyed by partition or division of coownership. However, this does not apply to the particular unit. In case the building is destroyed two-thirds or more by fire or other disaster, 75 percent of the coowners of the condominium project can decide whether to have the building rebuilt or the insurance money divided proratably among the coowners.
Under section each coowner of a unit has the absolute right under the rules promulgated by the board of directors or administration, or manager, or council, to use the common elements.
Section 9 establishes the procedure for creating the condominium unit. You will note that the developer may cause a plat or plats to be made by the surveyor. The reason the word "may” is used rather than the word "shall” is so as to give the owner of a particular subdivision a choice of either establishing or not establishing a condominium unit. Under 9(a) the full details and dimensions of each particular unit must be specified and spelled out. Thereafter, it will be sufficient to simply refer to the number of the unit set forth in the plat whenever the property is further conveyed. This is covered by section 10.
Under section 11 of the act, the regime cannot be terminated without the consent of all the coowners or the sole owner of the building. It is felt that it would be difficult to finance the individual condominium units if the regime could be destroyed without the consent of all the owners.
Sections 13 and 14 authorize the adoption of bylaws, a copy of which must be annexed to the declaration under which the condominium regime is established and recorded among the land records. Thus each condominium owner will have public notice of the provisions of the bylaws and his rights and obligations thereunder and the results of noncompliance with the bylaws. The bylaws should also spell out whether in the event the owner of a unit desires to sell it the other coowners should have the first refusal. In some jurisdictions this matter is covered by statute and the usual proviso is that the remaining owners of units have the right to meet any offered purchase price within 10 days. This is a protection to the other owners and in this fashion they have some control over the ownership of particular units. We felt that this matter can best be covered by the bylaws.
Section 15 provides for the keeping of accurate books of account which are open to all coowners during reasonable business hours. Books are to be kept according to standard accounting practice.
Section 16 spells out the responsibilities of coowners to contribute toward the maintenance of the common elements and the nature and extent thereof and the responsibility for making repairs. No owner may escape contributing toward the upkeep of common elements by giving up the use or enjoyment of the individual unit belonging to him or her.
Section 17 spells out the creation of liens and the enforcement of liens for nonpayment toward the expenses of the common elements.
Section 18 sets out the right of a purchaser or lender to receive a statement from the management setting forth the unpaid assessments against the seller or borrower.
Section 19 outlines a supplementary method of enforcement of liens against a particular unit.
Sections 20 and 21 relate to insurance and application of proceeds thereof.
Section 22 provides for sharing of reconstruction cost in event building is underinsured or uninsured.
Section 23 spells out specifically the procedure whereby each condominium unit is taxed separately.
Section 24 deals with the filing of suits against or on behalf of unit owners. Section 25 refers to the enforcement of mechanics' and materialmen's liens. Section 26 covers the matter of zoning of condominium units. Section 27 provides for the supplement of existing code provisions, and section 28 provides that if any part whatever of the proposed act is held to be invalid, the remaining provisions will not be affected thereby.
Our act contemplates that with each condominium project a map will have to be recorded in the surveyor's office. The tax assessor will then be required to separately assess each unit for real estate taxes exactly the same as in vogue now with each lot and square.
In concluding, let me say that the enactment of this proposed legislation will definitely benest the people of the District of Columbia. It will greatly enlarge the base of possible homebuyers. There are a great many people who vould like to own an apartment at the present time but simply do not have the money to make the necessary down payments and to carry the apartment afterwards. Since FHA loans are now available, these people are all interested prospects for the ownership of condominium units. The act facilitates the purchase and financing of individual units in a manner not now possible.
Judge MUNTER. It shows that the bar association and the people in the real estate business and lending business are vitally interested in this.
That is the reason I made the remark as to it being our best attended meeting
I want to pay credit at this point to Mr. Wilford Maki, who is an assistant vice president of the Lawyers' Title Insurance Co. of Richmond, and who has done a great deal of work on this project with our committee.
He is a member of the bar association, and on account of his company searching titles throughout the whole country on the condominium project, I have asked him to come up here and, subject to your wishes, to explain this H.R. 4276 in detail, section by section, if that is your desire.
And Mr. Maki is here.
Mr. HUDDLFSTON. Well, Judge, we have quite a lengthy array of witnesses appearing before the subcommittee this morning, and we will hear all we can.
Judge MUNTER. Yes,
Mr. HUDDLESTON. I want to make a personal request that as many of them as possibly can, and who have prepared statements, insert their statements in the record as they are called up.
I have studied this legislation. I find no objection to it.
It has now come to my attention that there is some objection. I did not know about the watermeter readers.
I was not aware that they might be opposed to the legislation. I was interested in getting that comment.
But Mr. Maki is listed as one of the witnesses, and we will call him in order.
Judge MUNTER. Very well.
Mr. HUDDLESTON. Judge, I want to express the appreciation of the subcommittee for your taking the time from what I know is a very busy schedule to appear before us and give us your excellent comments.
Judge MUNTER. Well, I am never too busy to appear before anybody from Alabama.
Mr. HUDDLESTON. Thank you, sir.
(Subsequently the following letter was received by Chairman Huddleston:)
MUNTER, ADAMS, THOMSON & BASTIAN,
Washington, D.C., May 7, 1963. Re proposal to amend section 11 of H.R. 4276. Hon. GEORGE HUDDLESTON, Jr., U.S. Representative, Cannon Building, Washington, D.Č.
MY DEAR MR. HUDDLESTON: The proposal to permit termination by 80 percent of the coownership under section 11 may well defeat the ends and purposes of the act. The 100-percent provision in the act is for the protection of mortgagees and other parties advancing moneys toward the purchase price of a condominium unit. Building and loan associations, banks and insurance companies are required by law to lend only upon the security of first mortgages on real estate. The act creates a statutory fee simple interest-the condominium unit-and hence it should qualify as proper security for mortgage loans. However, if the security can be reduced without the joint action of all (100 percent) of the owners from an absolute fee simple interest in a unit to only an undivided interest in the whole project, a lender may find itself with loans in its portfolio that contravene its established lending requirements. That is, if 20 percent of the coownership is encumbered and the other 80 percent terminates the regime, the party secured will find itself with a mortgage secured only upon an undivided 20 percent interest in the particular project. Hence the security is altered by the loss of the statutory fee simple attributes of the condominium unit. Any reduction from 100 to 80 percent should only be allowed after careful consideration of this aspect by the mortgage lenders and their approval thereof or by changing the language in lines 17 through 24 on page 12 to require the assent of all lenders with security upon any of the units if less than 100 percent of the coownership is permitted to terminate. In my opinion it would be detrimental to the whole legislation to change the requirement of a 100-percent consent to the termination of the condominium regime. Respectfully submitted.
GODFREY L. MUNTER. Mr. HUDDLESTON. At this point, we will insert into the record a letter dated February 4, 1963, to Chairman McMillan, from Thomas S. Jackson, Esq., president of the Bar Association of the District of Columbia. (The letter referred to follows:) The Bar AssoCIATION OF THE DISTRICT OF COLUMBIA,
Washington, D.C. February 4, 1963. Hon. John L. MCMILLAN, Chairman, Committee on the District of Columbia House of Representatives, Washington, D.C.
DEAR MR. McMillan: You will recall that in the 87th Congress at the request of the Bar Association of the District of Columbia you arranged to have introduced by Hon. Basil Whitener a bill to provide for the creation of horizontal property regimes in the District of Columbia (H.R. 12256). No action was taken on that bill, commonly called the condominium bill and permitting of fee simple ownership of a unit in a multiunit apartment or office building along with common ownership of facilities used in common. We asked that it be introduced last year with the thought that this would permit interested persons and groups to study and make suggestions concerning the bill, with a view to its serious consideration in the 88th Congress.
I now enclose for your consideration and with the respectful request that you again introduce this legislation, a draft of a bill that contains some changes from the bill introduced in the last Congress. In fact, not many changes were found needful, and most of these are very minor.
The principal changes are designed to take account of the technical comments of the Housing and Home Finance Agency on the original Senate bill, which were sent to Senator Bible under cover of a letter dated October 19, 1962.
By reference to the Agency's comments you will see that all save one of the technical changes proposed by the Agency have been incorporated in the revised draft. The exception occurs in section 6 of the bill and relates to the suggestion of the Agency numbered 6. The Agency proposed that it be required that individual condominium unit deeds make reference to the statute, to the plats referred to in section 10 of the statute, to the declaration setting forth the percentage interest of each owner in the common elements of the property, to the bylaws of the council of coowners and to all other recorded instruments. Because of practical recording problems that such an absolute requirement would create in the District of Columbia such references have been made permissive rather than mandatory in the draft of section 6 of the revised bill. We understand that this is acceptable to the Housing and Home Finance Agency:
Indeed, representatives of the Federal Housing Administration, one of the agencies within the Housing and Home Finance Agency, told the members of this association in October that even prior to the technical revisions that have been made, the bill sponsored by this association contained many improvements of condominium statutes or bills in other jurisdictions that would be included in the FHA model condominium bill.
If you or members of your staff have questions with respect to this draft, please do not hesitate to be in touch with Mr. Robert W. Barker, chairman of our standing committee on pending legislation, or Mr. William H. Allen, 701 Union Trust Building, who is the chairman of the condominium subcommittee. Sincerely,
Thomas S. Jackson, President. Mr. HUDDLESTON. Our next witness is Assistant Corporation Counsel Irving M. Bryan.
STATEMENT OF IRVING M. BRYAN, ASSISTANT CORPORATION
COUNSEL, ON BEHALF OF THE BOARD OF COMMISSIONERS OF THE DISTRICT OF COLUMBIA
Mr. HUDDLESTON. Mr. Bryan, do you have a prepared statement? Mr. BRYAN. No, sir; I do not.
Mr. Chairman, for the record, I am appearing on behalf of the Board of Commissioners for the District of Columbia.
And I might say that initially the Commissioners have given some consideration to this proposed legislation and they are not opposed to enactment of legislation which seeks to carry out the principle and the purpose of condominium, as we understand it.
However, the Commissioners do wish to point out that the details of this particular bill appear to create a number of problems for the government of the District of Columbia.
For example, it appears to the District that many areas of enforcement of the laws of the District of Columbia would be affected by the passage of this bill.
Although a State statute, worded similar to this bill, might be sufficient to enable the establishment of this type of property ownership within a State, the District of Columbia, possessing the attributes of both a State and a city and certain other special characteristics as the seat of the Federal Government, which is not true of any other city or any other jurisdiction, creates the unique situation we are in and creates special problems.