What the heck is a site condo anyway?

If you haven’t bought a new home in quite a while in Michigan you may be surprised when your Realtor® tells you that you’ve been looking at “site condos”, when you thought you were in subdivisions looking at houses. You were looking at houses, but you might have actually been in a condo complex.

In the mid-1980’s builders grew tired of having to spend a year or more going through all of the processes that were in place to develop a piece of land as a platted sub. They looked around for a quicker and easier way to develop properties and settled upon the Michigan Condominium Law for relief.

houses in sub

The Michigan Condominium Law was passed in 1978 and modified in 1983 (perhaps with the help of those developers). It provides a quicker way to get all of the permissions to develop a parcel of land. One trade-off for that speed is that the developer and later the owners themselves take responsibility for the roads and any common areas. That is an important savings for the communities, since they no longer have to maintain the roads in the complex.

In a normal, multi-family condo complex the individual dwellings (just called the unit in the legal description) are either contained within large buildings (high-rise condos) or connected smaller buildings. There were also condo complexes built where the dwellings were individual units – called detached condos. No matter which style was used the condo concept was the same – the owners actually own the inside of the building (often stated as “from the last layer of paint inward”) and the condo association (made up of all of the owners) owns the building themselves and all of the grounds and roads within. Condo owners pay a monthly fee to the condo association to cover the maintenance of the grounds and all exterior maintenance. The association also insures the building and grounds.

Developers of site condos took the concept of a detached condo a step further. In a site condo the “unit” became the ground your home sits upon (your lot, so to speak) and your house) and the owner is held responsible for all of the maintenance of both the lot and the house; however, owners are also required to belong to the condo association, which still owns and maintains the roads and any common areas.  The association collects monthly or annual fees to maintain those common areas. The most common use of those fees is for road maintenance – snow removal in winter and patching or replacement of roads as needed. If there is an entrance island to the complex, that is usually owned and maintained by the association, too.

man with questionWhat should I care if it’s a site condo?

Most of the time it won’t make any difference to you whether you live in a site condo complex or a platted sub. The two look and feel much the same. Even platted subs may have homeowners associations, although they are usually voluntary and may be associated with some shared facility like a neighborhood beach. When the time comes to do needed road repairs or if someone brings a lawsuit against the complex over some issue, then you’ll appreciate the differences, because you’ll end up paying for it through the association. Even deciding to paint your house may bring the association into the picture.

All site condo complexes have a Master Deed, which defines the restrictions that you accept when you buy into the complex and which also defines the role and authority of the condo association that you are required to be a members of because you bought a unit within the complex. The By-Laws of that association will define a set of rule that you must live by. Those rules can (and most often do) dictate the approval process for add-ons, pools, even exterior paint colors that can be used within the complex. Some people find those rules to be onerous and intrusive, but they are generally there to protect the overall value of all of the units in the complex, by preventing unseemly or unsightly changes to the units within the complex. They may even dictate whether personal property such as boats or RV’s can be stored outside within the complex, which is often a bone of contention with owners.

What can I do to make sure that I can live with the rules of a particular site condo complex?

When you are considering buying in any site condo complex you can askrules to see the By- Laws of the complex. You will be giving the right to review those By-Laws within a reasonable time period after making a purchase and may back out of the purchase agreement if you find them to be too restrictive.

What else should I know about site condos before I buy?

Since they are built under the Michigan Condominium Law, builders are required to fill out paperwork certifying non-discrimination within the complex while they are developing the complex, if they want the units in the complex to qualify for FHA or VA backed loans. There are rules also about how much of the complex must be developed and sold before units can be financed with FHA or VA-backed loans. Sometimes developers didn’t fill out those forms and now homes (units) in those developments don’t qualify for FHA or VA loans. Have your Realtor check to see that the complex is certified.

The final thing to check out is whether or not the association is doing a good job of managing it’s funds to deal with the future. All associations should be collecting and accumulating sufficient funds to deal with future road repairs; otherwise you may be surprised by a big assessment at some future date. The By-Laws for all condo associations have provisions for assessing member/owners for such things. Check to see if the association is doing the right things and collecting sufficient fees to be prepared. It may feel good to have a low association fee right now; but just wait until the roads in the complex need to be replaced.


19 Responses to What the heck is a site condo anyway?

  1. This is very good info – too many do not understand what a site condo is! Now if only VA would understand!

  2. cwragents says:

    I am a Broker in Traverse City and am headed to DC this month to speak before the Senate Committee for Veterans Affairs on this very issue. Any instances that anyone can bring to me in writing of how a Veteran has been negatively impacted by site condos, I would be delighted to take with me. Also, can anyone tell me if there are site condo’s in any other state in the nation or is it just us here in MI that have been blessed with these issues.

    • normwerner says:

      As far as I can tell Michigan is unique in the concept of the “site-condo”. This was a mechanism that developers and builders embraced because it provided a short cut to doing new subdivision developments. The laborious process for getting approval for a platted sub took (and still does one presumes) a year or more to get through all of the hearings and permit approvals; whereas the rules for a condo development take only 6 months or less.

      All it took was the imagination of the builders to call the land and the house a unit within the condo complex to get the ball rolling. What many developers didn’t understand or didn’t care about were the VA rules for getting a condo complex certified. Most developers did go through the FHA process. Until recently was not a process in place for getting a condo complex certified for VA loans after the complex build-out was completed. FHA had a process called “spot certification” which may buyers used to get into uncertified complexes.

      Almost every “sub”that has been built n Michigan since the mid-1980s has been a site-condo. I have conducted searches for homes for vets where we had to look along and hard to find plated subs so that they could use their VA benefits. The last one that I did was couple of years ago,but we couldn’t bid on several house that the client wanted to buy because of that issue.

      • Hello Norm! I am a certified residential real estate appraiser in southern California, and I am currently appraising what appears to be a site condominium. It seems to have all the characteristics you mention above, and matches the description in the Fannie Mae and FHA guidelines (as well as a couple of different mortgage letters, if I’m not mistaken), so it does not appear the site condo is peculiar to Michigan. I still need to verify this is what I am dealing with, but it sure looks that way!

    • veteran says:

      I have been denied on numerous occasions for my “site-condo” in Howell, MI. I have asked the board to revisit the by-laws and deed and they refuse. I have done everything in my power to be cordially but I now believe since this is an affluent area and comments that have been made by board members that my family is being discriminated against.

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