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2017 Legislative Update, Part 1: Bill to Allow Addition of Property into Condominium Project after Termination of Developer’s Original Right to Expand to Become Law July 1, 2017.

leg-update_pic_6-26-17Condominium developers often develop new condominium projects in phases, adding one portion, or “phase”, of property into the condominium at a time as such phases are constructed until eventually the entire property the developer intends to submit is added into the condominium.   While this process ordinarily occurs continuously until full completion, when the developer is foreclosed upon or otherwise ceases business mid-construction, as frequently occurred during the recent economic downturn, unit owners within a partially built-out condominium project can be left to suffer for the developer’s failure to finish. For example, these owners may pay higher assessments than expected because the total number of units originally intended to share in the common expenses were not built, and/or may be left staring out at the vacant, often unkempt pieces of property that were once intended to be condominium units or recreational area.

What’s more, the current Georgia Condominium Act (the “Act”) can make these unit owners’ situations permanent by preventing a new developer from buying the unbuilt property and adding it into the condominium. Specifically, O.C.G.A. § 44-3-77(b) of the Act currently provides that a developer has a deadline of up to 7 years from the date of recording of the condominium’s declaration to add in all the proposed condominium property, and the only method by which a developer can expand that deadline is to obtain the approval of 2/3rds of the unit owners other than the developer within the one year prior to the deadline for expansion. Under current law, if the developer fails to obtain an extension in that one year time period, the right to expand the condominium ceases and any property that has not been added in by the deadline can no longer be added in.

As one can imagine, in the case of a developer’s foreclosure or bankruptcy, the developer often misses this deadline, which can leave unit owners permanently living in a partially built-out condominium project. Thankfully, however, due in large part to the efforts of Georgia’s Community Association Institute (“CAI”)’s Legislative Action Committee, a new bill will go into effect July 1, 2017 designed to fix this problem. The new bill, to be codified at O.C.G.A. § 44-3-89(c), will do away with the statutory 1 year time period in which to obtain a unit owner vote to extend the 7 year expansion timeframe, and will allow the developer, or successor developer, to extend the 7 year timeframe by obtaining the approval of 2/3rds of the unit owners (other than the developer) at any time after the developer’s original right to expand the condominium expires.