A. To exercise any development right reserved under Paragraph (8) of Subsection A of Section 17 [47-7B-5 NMSA 1978] of the Condominium Act, the declarant shall prepare, execute and record an amendment to the declaration and comply with Section 21 [47-7B-9 NMSA 1978] of the Condominium Act. The declarant is the unit owner of any units thereby created. The amendment to the declaration shall assign an identifying number to each new unit created, and, except in the case of subdivision or conversion of units described in Subsection C of this section, reallocate the allocated interests among all units. The amendment must describe any common elements and any limited common elements thereby created and, in the case of limited common elements, designate the unit to which each is allocated to the extent required by Section 20 [47-7B-8 NMSA 1978] of the Condominium Act.
B. Development rights may be reserved within any real estate added to the condominium if the amendment adding that real estate includes all matters required by Section 17 or 18 [47-7B-5, 47-7B-6 NMSA 1978] of the Condominium Act as the case may be, and the plats and plans include all matters required by Section 21 [47-7B-9 NMSA 1978] of that act. This provision does not extend the time limit on the exercise of development rights imposed by the declaration pursuant to Paragraph (8) of Subsection A of Section 17 [47-7B-5 NMSA 1978] of that act.
C. Whenever a declarant exercises a development right to subdivide or convert a unit previously created into additional units, common elements or both:
(1) if the declarant converts the unit entirely to common elements, the amendment to the declaration shall reallocate all the allocated interests of that unit among the other units as if that unit had been taken by eminent domain; and
(2) if the declarant subdivides the unit into two or more units, whether or not any part of the unit is converted into common elements, the amendment to the declaration shall reallocate all the allocated interests of the unit among the units created by the subdivision in any reasonable manner prescribed by the declarant.
D. If the declaration provides, pursuant to Paragraph (8) of Subsection A of Section 17 [47-7B-5 NMSA 1978] of the Condominium Act, that all or a portion of the real estate is subject to the development right of withdrawal:
(1) if all the real estate is subject to withdrawal, and the declaration does not describe separate portions of real estate subject to that right, none of the real estate may be withdrawn after a unit has been conveyed to a purchaser; and
(2) if a portion or portions are subject to withdrawal, no portion shall be withdrawn after a unit in that portion has been conveyed to a purchaser.
History: Laws 1982, ch. 27, § 22.
ANNOTATIONSCompiler's notes. — This section is similar to § 2-110 of the Uniform Condominium Act, with the following main exception: the third sentence of subsection A of this section of the state Condominium Act refers to "Subsection C of this section," while subsection (a) of § 2-110 of the Uniform Condominium Act refers to "subsection (b)."
COMMISSIONERS' COMMENT
1. This section generally describes the method by which any development right may be exercised. Importantly, while new development rights may be reserved within new real estate which is added to the condominium, the original time limits on the exercise of these rights which the declarant must include in the original declaration may not be extended. Thus, the development process may continue only with the self-determined constraints originally described by the declarant.
2. The reservation and exercise of development rights is and must be closely co-ordinated with financing for the project. As a result, lender review and control of that process is common, and the financing documents should reflect the proposed development process.
A typical construction loan mortgage on a portion of a phased condominium might provide that as soon as new units are built on new land to be added (or, if the portion is also designated withdrawable land, as soon thereafter as anyone other than the declarant becomes the unit owner of a unit in the withdrawable land) the mortgage on that land converts into a mortgage on all of the units located within that portion, together with their respective common element interests. The common element interest of those units will, of course, extend to the common elements in other sections of the condominium. However, failure of a construction loan mortgage to so provide is inconsequential, because conveyance of the units in that phase to the lender or to a purchaser at a foreclosure sale would automatically transfer all of those units' common element interests, as a result of the requirements of §§ 2-108(d) [2-107(e)] and 2-111(a) [2-110(a)] [47-7B-8E NMSA 1978 and Subsection A of this section].
3. A lender who holds a mortgage lien on one portion of a condominium may not cause that portion to be withdrawn from the condominium unless the portion constitutes withdrawable real estate in which there is no unit owner other than the declarant. Even then, the amendment effectuating the withdrawal must be executed by the declarant. Consequently, unless the lender wishes to become a declarant subsequent to foreclosure or a deed in lieu of foreclosure in order to execute the amendment, or forecloses in order to require an amendment from the association under § 2-118(i) [47-7B-18I NMSA 1978], a lender might require that the signed amendment be deposited in escrow at the time the loan is made in order to protect against a recalcitrant borrower.
4. As indicated in the comments to §§ 1-103(24) and 1-106 [47-7A-3, 47-7A-6 NMSA 1978], the withdrawal of real estate from a condominium may constitute a subdivision of land under the applicable subdivision ordinance. Under most subdivision ordinances, the owner of the real estate is regarded as the "subdivider." In the event of a withdrawal under this section, however, the declarant is in fact the subdivider because of his unique interest in and control over the real estate, even though the real estate, for title purposes, is a common element until withdrawn. Accordingly, he would bear the cost of compliance with any subdivision ordinance required to withdraw a part of the real estate from the condominium.
5. Subsection (c) [Subsection C] deals with special problems surrounding allocated interests when the declarant subdivides or converts units which were originally created in the declaration into additional units, common elements or both. This development right permits the declarant to defer a final decision as to the size of certain units by permitting the subdivision of larger interior spaces into smaller units. The declarant may thus "build to suit" for purchasers' needs or to meet changing market demand. The concept is called "convertible space" in several existing state statutes.
For example, a declarant of a five-story office building condominium may have purchasers committed at the time of the filing of the condominium declaration but a lack of purchasers for the upper two floors. In such a circumstance, the declarant could designate the upper two floors as a unit, reserving to himself the right to subdivide or convert that unit into additional units, common elements of a combination of units and common elements as needed to suit the requirements of ultimate purchasers.
If, at a later time, a purchaser wishes to purchase half of one floor as a unit, the declarant could exercise the development right to subdivide his two-floor unit into two or more units. He may also wish to reserve a portion of the divided floor as a corridor which will constitute common elements. In that case, he would proceed pursuant to this subsection to reallocate the allocated interests among the units in the manner described in this section.
Alternatively, the declarant may ultimately decide that the entire two floors should be turned over to the unit owners' association not as a unit but as common elements to be used perhaps as a cafeteria serving the balance of the building, or for retail space to be rented by the association. In that case, should he choose to make the entire two floors common elements, the provisions of paragraph (c) (1) [Subsection C (1)] would apply.
Compiler's notes. — The reference to § 2-108(d) of the uniform act in the last sentence of the second paragraph of Comment 2 seems incorrect, as § 2-108 does not have a subsection (d). Section 2-107(e) seems to be the correct reference.
The reference to § 2-111(a) of the uniform act in the last sentence in the second paragraph of Comment 2 seems incorrect, as § 2-111 has no subsection (a). Section 2-110(a) seems to be the correct reference.
Am. Jur. 2d, A.L.R. and C.J.S. references. — 15A Am. Jur. 2d Condominiums and Cooperative Apartments §§ 14, 15, 18.
31 C.J.S. Estates § 153 et seq.