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Lot vs. Unit: Avoiding Description Errors in Transactions Involving Condominium Units

Client Alert

Author: Kate W. Millikan

3/19/2020
Lot vs. Unit: Avoiding Description Errors in Transactions Involving Condominium Units

In the purchase, sale or development of commercial condominium units, it is fundamental for both investors and developers to understand exactly what comprises the “unit.” It is equally important that the documents associated with the acquisition or sale of a unit (i.e. letter of intent, agreement of sale, title commitment, deed, etc.) describe and identify the unit accurately.

Condominium Basics

The Pennsylvania Uniform Condominium Act, 68 Pa. C.S. §3101 et seq., as amended (PUCA), governs condominiums within the Commonwealth of Pennsylvania. Under the PUCA, creation of a condominium begins with the recording of a declaration in the office of the recorder of deeds for the county in which the condominium real estate is located. The declaration sets forth certain covenants, easements and restrictions, establishes and empowers an association, and identifies the common elements and units. It is the PUCA that permits the formation of “units.”

The PUCA defines “unit” as “[a] portion of the condominium designated for separate ownership, the boundaries of which are described pursuant to section 3205(4) (relating to contents of declaration; all condominiums).” Section 3205(4) of the PUCA provides that the declaration for a condominium must contain “[a] description or delineation of the boundaries of each unit, including the unit's identifying number.” Section 3205(4) expressly provides for flexibility in defining the legal boundaries of each unit within a condominium, which are often not so obvious. One needs to consult the declaration to understand exactly what the boundaries are and what comprises each discrete unit.

'Lot' vs. 'Unit'

In projects that have a subdivision plan component, it is a common misconception that the legal boundaries of a “unit” created pursuant to the PUCA are identical to the subdivision lines defining a particular lot or parcel of real estate. A unit and a lot are two different concepts. In some condominiums, the legal boundary lines of a unit will be identical to the subdivision boundary lines of a lot (Unit = Lot). However, lot lines do not have to correspond with unit boundary lines, and typically they do not. As explained above, it is the declaration that delineates the legal boundaries of each unit and the PUCA allows developers the flexibility to be creative in defining unit boundaries.

There are a variety of reasons why unit boundaries may not match lot boundaries. For example, depending on how a developer wants to allocate maintenance responsibilities for certain areas or features within the condominium, it may not be appropriate for a unit’s boundary lines to match the boundary lines of a lot because certain infrastructure serving all units (such as a main stormwater basin or primary right-of-way) may be located on that lot. In some cases, several units may be located within the boundaries of a single lot or parcel of real estate. The boundaries of a single unit may be the inside surfaces of an apartment within a multifamily building, the building itself (boundaries matching the building envelope), or a building along with its parking lot.

Avoiding Description Errors in Condominium Unit Transactions

Given the flexibility under the PUCA in defining unit boundaries, it is not a good idea to use a standard metes and bounds legal description in transaction documents involving a unit. Although the declaration must include a description or delineation of the boundaries of each unit, using a traditional metes and bounds description in transactional documents can lead to serious consequences if that description is not consistent with the “unit” as described in the declaration.

A metes and bounds legal description opens the door for errors, especially in situations where the legal boundary lines of the unit (as described in the declaration) are not identical to the subdivision lines of a lot. For example, errors may occur in purchase and lease agreements for a unit when parties use a metes and bounds description because (a) parties mistakenly rely on the dimensions of the lot rather than the unit in calculating the consideration; (b) the property as described in the agreement is inconsistent with the unit as described in the declaration; or (c) the agreement mischaracterizes as part of the property certain rights that are actually held in common under the declaration. In transactions for units, title companies have erroneously insured the wrong property because a metes and bounds description was used. Developers have accidently conveyed lots before such lots have been created as units under the declaration (which provides grounds for those lot owners to argue that their lot is not subject to the declaration, or not subject to the covenants and restrictions in the declaration, including the obligation to pay assessments). This mistake might have been caught, or the strength of the argument minimized, if a metes and bounds legal description had not been used in the deed. Further, in documents pertaining to the purchase and sale of a condominium unit, a standard metes and bounds legal description alone does not accurately capture all of the property interests being conveyed with that unit.

So how should an agreement, lease, deed or mortgage describe a condominium unit?

The PUCA helps us here. Section 3204 of the PUCA provides that “[a]fter the declaration is recorded, a description of a unit which sets forth the name of the condominium, the recording data for the declaration, the county or counties in which the condominium is located and the identifying number of the unit is a sufficient legal description of that unit and its common element interest even if the common element interest is not described or referred to therein.” Thus, in transactional documents, the best practice is to describe the unit by the unit number and other information required by Section 3204, rather than by a traditional metes and bounds legal description.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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