The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)


STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5452

March 8, 1979

CONDOMINIUM ACT:

Sale of units of expandable and convertible condominiums

A developer who offers for sale a condominium unit in a later phase of an expandable or convertible condominium project, for which a permit to sell has been issued for the initial phase, must comply with section 89(1) of the Condominium Act which requires delivery of certain documents to the purchaser at least 10 days before the condominium unit is conveyed.

Keith Molin

Director

Michigan Department of Commerce

Law Building

P.O. Box 30004

Lansing, Michigan 48909

You have requested my opinion regarding the Condominium Act, 1978 PA 59; MCLA 559.101 et seq; MSA 26.50(101) et seq, and ask whether a developer who proceeds under Section 88(2) of the Condominium Act is subject to the requirements of Section 89 of the Act.

1978 PA 59, supra, Sec. 88(1), requires a developer to obtain a permit to sell condominium units prior to the sale of such units. Additionally, certain documentation must be provided to prospective purchasers as mandated by 1978 PA 59, Sec. 89(1), supra, which states:

'(1) After a permit to sell is issued by the administrator and at least 10 days before a condominium unit is conveyed or 10 days before a purchase agreement or a reservation and subscription agreement becomes a binding agreement, the developer shall provide to the prospective purchaser copies of the following documents relative to the condominium project:

'(a) The master deed.

'(b) The bylaws of the association.

'(c) Disclosure statements as prescribed by the administrator.

'(d) Other documents as prescribed by the administrator. . . .'

MCLA 559.189(1); MSA 26.50(189)(1)

The legislature has established an exception from the requirement that a developer obtain a permit to sell condominium units when later phases of expandable condominium projects and convertible condominium projects are being sold and a permit to sell was issued for the initial unit. An 'expandable condominium' project is defined as 'a condominium project to which additional land may be added pursuant to express provision in the condominium documents and in accordance with this act.' 1978 PA 59, supra, Sec. 6(3). The term 'convertible condominiums' is not expressly defined; however, 'convertible area' is defined to be 'a unit or a portion of the common elements of the condominium project referred to in the condominium documents within which additional condominium units or general or limited common elements may be created pursuant to express provision in the condominium documents and in accordance with this act.' 1978 PA 59, supra Sec. 5(3). Thus, the reference to 'convertible condominiums' in this opinion will be to those units erected in such a 'convertible area.'

This exception to the requirement that a permit to sell condominium units be obtained prior to selling the condominium unit is contained in 1978 PA 59, Sec. 88(2), supra, which states:

'When a permit to sell is issued for the initial phase of an expandable or convertible condominium project, then the developer may offer for sale and enter into a binding purchase agreement with respect to any condominium unit proposed to be included within the additional land of the expandable condominium or within the convertible land, even though a permit to sell is not issued for the condominium unit, if all of the following occur:

'(a) The condominium unit is one which the developer may properly include in the condominium project.

'(b) There is a site plan showing the location of the unit.

'(c) A substantially identical condominium unit was already included within the project for which a permit to sell was issued, or plans for the condominium unit which describe the physical characteristics of the unit exist and are appended to the purchase agreement.

'(d) The purchase agreement states that the condominium unit shall be conveyed to the prospective purchaser within 1 year after the execution of the purchase agreement. If conveyance is not made within that time the agreement is voidable under the conditions set forth in the agreement.

'(e) A permit to sell shall be issued within 6 months after the date of the purchase agreement.'

While 1978 PA 59, Sec. 88(2), supra, expressly allows certain expandable or convertible projects to be sold notwithstanding the fact that a permit to sell said units has not issued for the specific units in question, this section does not discharge the developer's duty under 1978 PA 59, Sec. 89(1), supra, to provide prospective purchasers certain documents. This section requires that 10 days before a purchase agreement becomes a binding agreement, the documentation set forth therein must be provided.

Additionally, after a permit to sell is issued by the administrator for the condominium unit sold pursuant to 1978 PA 59, Sec. 88(2), the documents set forth in Section 89 must be provided to prospective purchasers. Thus, a purchaser will receive two sets of documents when the developer proceeds under Section 88(2).

Therefore, it is my opinion that a developer who offers for sale a condominium unit in a later phase of an expandable or convertible condominium project for which a permit to sell had been issued for the initial phase is required to comply with Section 89(1), both at the time the offer for sale is to become a binding purchase agreement and at least 10 days before said condominium unit is conveyed.

Frank J. Kelley

Attorney General