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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. 6351 March 28, 1986 COMMERCIAL HOUSING: Tax exemption for portion of condominium project used for transient lodging purposes COMMERCIAL REDEVELOPMENT DISTRICTS: Tax exemption for portion of condominium project used for transient lodging purposes A condominium project consisting of 5 or more units which is rented for transient lodging accommodations and which is located in a downtown development district within a local governmental unit levying an income tax is eligible for a tax exemption under the commercial housing facilities act. The portion of a condominium project consisting of 5 or more units which is rented for transient lodging purposes is not eligible for tax exemption under the Commercial Redevelopment Act. Honorable Mitch Irwin State Senator The Capitol Lansing, Michigan You have requested my opinion on a question relating to the taxable status of condominium property under The General Property Tax Act, MCL 211.1 et seq; MSA 7.1 et seq, and its eligibility for tax exemption pursuant to the Commercial Redevelopment Act, MCL 207.651 et seq; MSA 7.800(51) et seq, or the commercial housing facilities act, MCL 207.601 et seq; MSA 7.792(1) et seq. You generally refer to a multi-unit condominium dwelling which, depending upon particular use, could be described as a hotel/motel, apartment hotel, or a residential apartment building. The developer, for example, records a master deed for a multi-unit facility, sells individual condominium units, but retains at least 5 units which are rented to the public as temporary or transient lodging accommodations. The developer also acts as a rental agent for the individual owners of the condominium units which have been sold and which are also available to the public on a rental basis for temporary or transient lodging. Your question may be stated as follows: When a condominium developer sells a number of condominium units and retains other units which are available to the public for rental as transient lodging accommodations, are the units retained by the developer and devoted to such use eligible for tax exemption under either the Commercial Redevelopment Act or the commercial housing facilities act? The General Property Tax Act, MCL 211.34c; MSA 7.52(3), classifies assessable real property, in pertinent part, as follows: '(2) The classifications of assessable real property shall be described as follows: (b) Commercial real property includes those platted or unplatted parcels used for commercial purposes, whether whole-sale, retail, or service, with or without buildings; those parcels used by fraternal societies; and those parcels used as golf courses, boat clubs, ski areas, or apartment buildings with more than 4 units. (e) Residential real property includes those platted or unplatted parcels, with or without buildings, and condominium apartments located within or outside a village or city, which are used for, or probably will be used for residential purposes; and those parcels which are used for, or probably will be used for recreational purposes, such as lake lots and hunting lands, located in an area used predominantly for recreational purposes.' [Emphasis added.] The Commercial Redevelopment Act, MCL 207.653; MSA 7.800(53), provides, in pertinent part: "Commercial property' means land improvements classified by law for general ad valorem tax purposes as real property . . . the primary purpose and use of which is the operation of a commercial business enterprise . . . but shall not include any of the following: (c) Housing, except that portion of a building containing nonhousing commercial activity.' [Emphasis added.] The term 'housing' is not defined in the Commercial Redevelopment Act. The exception of housing from the definition of 'commercial property' in said Act is consistent with the commercial housing facilities act, MCL 207.601; MSA 7.792(1), which defines certain facilities for commercial housing facilities tax exemption purposes: "New facility' means a new structure which will have as its primary purpose multifamily housing consisting of 5 or more units and will be constructed in a downtown development district established pursuant to Act No. 197 of the Public Acts of 1975 . . ..' [Emphasis added.] The commercial housing facilities act was enacted in 1976; when the Commercial Redevelopment Act was enacted in 1978, the Legislature was aware and indicated its intention that tax exemption for housing facilities should be pursuant to the commercial housing facilities act and thereby excepted housing from the Commercial Redevelopment Act. Therefore, it appears that a housing facility would not qualify for tax exemption under the Commercial Redevelopment Act, being expressly excepted therefrom. Such a housing facility would, however, if otherwise eligible, qualify for tax exemption under the commercial housing facilities act. Further, there is nothing in the commercial housing facilities act which would exclude from the general term 'housing' those multiple dwellings, such as hotels and motels, having a more transient tenancy. Multiple dwellings have been described in Michigan legislation to include hotels, apartment houses, apartment hotels, etc. The criterion which characterizes a facility as within the general term 'housing' is not the multiple number of units, but rather is its character as a dwelling or lodging. See definitions in the plumbing code, MCL 338.901a; MSA 14.451(1); the Public Health Code, MCL 333.12202; MSA 14.15(12202); and in the Use Tax Act, MCL 205.93a; MSA 7.555(3a), regarding lodgings. See also, Evangelical Alliance Mission v Village of Williams Bay, 54 Wis 2nd 187, 190; 194 NW2d 646, 648 (1972): 'The word 'housing' embraces shelter or lodging and contains nothing to reveal an ambiguity based on the length of time that persons occupy this housing.' Condominium ownership would have an effect upon a facility's eligibility under the commercial housing facilities act. OAG, 1981-1982, No 6008, p 464, 465 (November 19, 1981), concluded: 'Condominiums and condominium projects are governed by 1978 PA 59; MCLA 559.101 et seq; MSA 26.40(101) et seq. Upon filing a master deed for a condominium project, each condominium unit . . . becomes a sole property independent of the other condominium units for the purposes of ownership, mortgaging, taxation, possession, sale and all types of legal acts . . .. . . .. 'Based upon the foregoing, it is clear that condominiums are separately owned, financed, assessed and taxed. They are separate definable residences. The Legislature has expressly indicated that a condominium is a separate single unit of real property which may not be combined with any other units for tax purposes. Thus, a condominium is clearly not 'multifamily housing consisting of 5 or more units.' It is, therefore, my opinion that a project involving or consisting of individual condominiums does not qualify for the tax exemption certificate provided for in 1976 PA 438, supra.' [1976 PA 438 referring to the commercial housing facilities act] Condominium Act, MCL 559.101 et seq; MSA 26.50(101) et seq, contemplates that not all of the condominium units in a condominium project need be sold. MCL 559.104; MSA 26.50(104), provides, in pertinent part: '(3) 'Condominium unit' means that portion of the condominium project designed and intended for separate ownership and use, as described in the master deed, regardless of whether it is intended for residential, office, industrial, business, recreational, use as a time-share unit, or any other type of use . . ..' [Emphasis added.] Condominium developers 'may maintain offices, model units and other facilities.' MCL 559.145; MSA 26.50(145). Also, MCL 559.212; MSA 26.50(212), provides, in pertinent part: '(1) Unless the developer provides to the contrary in the condominium documents, the co-owner, including the developer, may rent any number of units at any time, without limitation as to the term of occupancy.' To the extent that individual condominium units have been sold by a developer of a condominium project, the individually-owned units would not qualify for tax exemption under the commercial housing facilities act, because each such unit would be individually owned and, therefore, would fail to qualify as 'multifamily housing consisting of 5 or more units.' [Emphasis added.] MCL 207.601(d); MSA 7.792(1)(d). When a condominium developer retains ownership of 5 or more units and devotes those units to commercial use as a hotel/motel or apartment motel, however, those units so utilized would constitute 5 or more units under a single owner and, thus, would be within the definition of the commercial housing facilities act, even though those units are part of a condominium project. Should any such units not be devoted to housing purposes, those units would not qualify for housing tax exemption, but would presumably qualify under the Commercial Redevelopment Act as a 'portion of a building containing nonhousing commercial activity.' MCL 207.653; MSA 7.800(53). Finally, it should be recognized that the above-quoted definition from the commercial housing facilities act requires that 'multifamily housing consisting of 5 or more units . . . will be constructed in a downtown development district established pursuant to Act No. 197 of the Public Acts of 1975.' MCL 207.601; MSA 7.792(1). MCL 207.602; MSA 7.792(2), provides: 'A local governmental unit, by resolution of its legislative body, may approve commercial housing facilities exemption certificates, if at the time of adoption of the resolution the local governmental unit has established a downtown development district pursuant to Act No. 197 of the Public Acts of 1975, as amended, and levies an income tax.' [Emphasis added.] It is my opinion, therefore, that condominium units reserved from sale and retained by a developer for rental as transient lodging accommodations would be eligible for tax exemption under the commercial housing facilities act, assuming the units retained exceed 5 in number, are used commercially, and the facility is a 'new facility . . . constructed in a downtown development district established pursuant to Act No. 197 of the Public Acts of 1975, and the local governmental unit levies an income tax.' It is further my opinion that such units would not, as housing, be eligible for tax exemption under the Commercial Redevelopment Act. Frank J. Kelley Attorney General
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