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Affordable Housing: Consider a “Twindominium”

Some duplex owners have considered converting their properties into two unit condominiums, known as “twindominiums”. There are several legal steps and quite a bit of paperwork that must be completed in order to accomplish the conversion. In order to create a condominium, the owner, with the assistance of an attorney and a surveyor, must file documents with the Register of Deeds. They include: • A condominium declaration (the legal document establishing the condominium form of ownership for the property) • A condominium plat or survey of the property showing all improvements In addition, every condominium must have an owners’ association, to which all unit owners must belong. The association operates and manages the condominium and oversees the property. The association for a twindominium has only the unit owners as members. There are additional documents that must be prepared and provided to every potential purchaser before closing. Wisconsin law has strict timelines about what information must be given and when, so an attorney should get involved early in the process to be sure everything is in order. If one of the duplex units is rented, the owner must provide the tenants with notice of the conversion at least 120 days before they need to vacate the property. In addition, the tenant has a first right to purchase the unit for a period of 60 days from the date of the notice. There are several other issues an owner should consider before converting a duplex. If both units are sold, then the former owner has no further involvement with the property. If the duplex owner decides to live in one of the units, the prospect of next-door renters becoming permanent property owning neighbors needs to be carefully examined. It’s very important that both purchasers have a very clear understanding of how a condominium is operated. There is no longer a landlord to make any needed repairs upon demand. The owner who creates a condominium must completely understand the way it will be operated in order to explain the respective rights and obligations to the unit new owners. The responsibilities for repairs are established in the condominium declaration. The declaration, the plat, and other disclosure materials are needed whether there are two units or two hundred units. Under condominium law, maintenance and repair of a “unit,” which is the space owned and occupied exclusively by the owner, is that unit owner’s obligation. The rest of the property is either “common element” or “limited common element.” Each unit owner owns part of the common element, which is that portion of the property jointly owned and used by both unit owners. Where a unit ends and the common element begins determines who is responsible for maintenance, repair, replacement, if needed, and insurance. Exterior walls, the roof, a shared garage, and a common driveway are all common elements. Limited common elements are those parts of the condominium owned by everyone, but only used by the owner of a particular unit. Examples of limited common elements would be attached balconies, patios, decks, garage spaces, or the like. Since a limited common element is still a common element, all owners share in the maintenance, repair and replacement of those portions of the condominium, even though not everyone may use them. A successful duplex conversion will probably include limited common elements for each unit, if possible, so each owner can enjoy the same amenities. Wisconsin law requires each condominium to have an owners’ association, organized to maintain, repair, and replace the common elements when they are damaged or worn out. The association also carries fire and casualty insurance for the entire property, other than the units, and a liability insurance policy to protect all of the owners from personal injury claims, such as a guest’s slip and fall on common element areas such as porch steps. The association can be either incorporated or unincorporated and includes all owners as members. The costs incurred by the association in performing these duties and carrying the insurance are assessed, usually monthly, to each unit owner. In a twindominium, the two owners must work together to take care of the property and share those costs. The monthly assessment is an additional expense for each unit owner in addition to taxes, mortgage payments, and insurance for the unit itself. The thing to remember is that the duties of repair, maintenance, and the like are based on the definitions of unit and common element. Those definitions are established by the duplex owner in the condominium declaration. The duplex owner, working with his or her attorney, has the opportunity to establish these definitions, thereby creating the rights and obligations under which the unit owners must live. The duplex owner decides who owns what and how the costs are to be shared. This is very important to the owner who will continue to live in one of the units after the other is sold, since the duplex owner also becomes a unit owner, subject to the provisions of the declaration and the association rules. After the documents are recorded and a unit is sold, the duplex owner is no longer in charge of the property. These are just some of the issues that an owner must address before converting a duplex into a twindominium. There are others, which should be discussed with an attorney experienced in the creation of these unique condominiums.