J. Patrick Sutton Cases & Issues Blog

The Problem with Duplex Condominium HOA's

In the Austin area, urban infill has put a premium on maximizing the square footage of new houses on expensive urban lots. Developers and builders are responding by building what used to be called "duplexes" but are increasingly being called "condominiums." The distinction has largely to do with permitting and zoning.
Developers have an easier time selling individual units of a larger building if they sell each unit as part of a "condominium." Really, they're just duplexes in many ways, but it's usually difficult to draw a line down the middle -- like in that old Brady Bunch episode where Greg and Peter split their bedroom -- because indivisible elements like porches, roofs, and stairs don't lend themselves to easy division. Thus, the 2-unit condo is born.

The problem is not the nomenclature -- a rose by any other name would still smell as sweet -- but the legal trappings. Buyers of these 2-unit condos don't understand the profound challenges posed by running a fully-documented, incorporated HOA that owns some of the elements of the property. The most serious problem, by far, is deadlock.

Condos typically have long, elaborate declarations, plus bylaws and rules. This means that the building and grounds owned by just two persons, and by the HOA, are governed by long, legalistic documents that require the owners to perform various legalistic acts, like convening meetings, taking votes, filing corporate filings, etc. It means assessments, too, since the common elements have to be maintained by the HOA, which must collect money from the two owners.

But what if the owners do not see eye to eye? What if one owner refuses to pay assessments? A vote of the members won't work since everything has to be done by at least a majority vote. The whole HOA enterprise comes screeching to a halt. The HOA structure no longer works.

Fortunately, Texas law has a remedy for this sort of problem, but it involves court appointment of a third party to take over the HOA and basically fix it so that deadlock either cannot occur or else is quickly remedied each time it does. It's a somewhat expensive proposition. That said, it's a better result than the severe consequences on property value of a duplex condo HOA that has failed of its essential purposes. No one wants to pay full price for a condo unit like that!
J. Patrick Sutton Cases & Issues Blog