As used in the Condominium Act and declaration and bylaws, unless the context otherwise requires or otherwise specifically provided:

A. "affiliate of a declarant" means any person who controls, is controlled by or is under common control with a declarant. For the purpose of this subsection:

(1) a person "controls" a declarant if the person is a general partner, officer, director or employer of the declarant; directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than twenty percent of the voting interest in the declarant; controls in any manner the election of a majority of the directors of the declarant; or has contributed more than twenty percent of the capital of the declarant; and

(2) a person "is controlled by" a declarant if the declarant is a general partner, officer, director or employer of the person; directly or indirectly or acting in concert with one or more other persons, or through one or more subsidiaries, owns, controls, holds with power to vote, or holds proxies representing, more than twenty percent of the voting interest in the person; controls in any manner the election of a majority of the directors of the person; or has contributed more than twenty percent of the capital of the person. Control does not exist if the powers described in this subsection are held solely as security for an obligation and are not exercised;

B. "allocated interests" means the undivided interest in the common elements, the common expense liability and votes in the association allocated to each unit;

C. "association" or "unit owners' association" means the unit owners' association organized under Section 34 [47-7C-1 NMSA 1978] of the Condominium Act;

D. "common elements" means all portions of a condominium other than the units;

E. "common expenses" means expenditures made by or financial liabilities of the association, together with any allocations to reserves;

F. "common expense liability" means the liability for common expenses allocated to each unit pursuant to Section 19 [47-7B-7 NMSA 1978] of the Condominium Act;

G. "condominium" means real estate, portions of which are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of those portions. Real estate is not a condominium unless the undivided interests in the common elements are vested in the unit owners;

H. "conversion building" means a building that at any time before creation of the condominium was occupied wholly or partially by persons other than purchasers or persons who occupy with the consent of purchasers, and shall for the purposes of Sections 64 and 65 [47-7D-12, 47-7D-17 NMSA 1978] only of the Condominium Act include mobile housing parks;

I. "declarant" means any person or group of persons acting in concert who:

(1) as part of a common promotional plan, offers to dispose of its interest in a unit not previously disposed of;

(2) reserves or succeeds to any special declarant right; or

(3) executes and records a declaration;

J. "declaration" means any instruments, however denominated, that create a condominium, and any amendments to such instruments;

K. "development rights" means any right or combination of rights reserved by a declarant in the declaration to:

(1) add real estate to a condominium;

(2) create units, common elements or limited common elements within a condominium;

(3) subdivide units or convert units into common elements; or

(4) withdraw real estate from a condominium;

L. "dispose" or "disposition" means a voluntary transfer to a purchaser of any legal or equitable interest in a unit, but such term does not include the transfer or release of a security interest;

M. "executive board" means the body, regardless of name, designated in the declaration to act on behalf of the association;

N. "identifying number" means a symbol or address that identifies only one unit in a condominium;

O. "leasehold condominium" means a condominium in which all or a portion of the real estate is subject to a lease the expiration or termination of which will terminate the condominium or reduce its size;

P. "limited common element" means a portion of the common elements allocated by the declaration or by operation of Subsections B and D of Section 14 [47-7B-2 NMSA 1978] of the Condominium Act for the exclusive use of one or more but fewer than all of the units;

Q. "master association" means an organization described in Section 32 [47-7B-20 NMSA 1978] of the Condominium Act, whether or not it is also an association described in Section 34 [47-7C-1 NMSA 1978] of the Condominium Act;

R. "mobile housing park" means any site used for the business of renting, leasing or providing, for any form of compensation, a mobile housing unit for occupancy on property not owned by the mobile housing unit's occupant or providing space and facilities for a mobile housing unit owned by the occupant;

S. "mobile housing unit" means a movable or portable housing structure over thirty-two feet in length or over eight feet in width, constructed to be towed on its own chassis and designed so as to be installed without a permanent foundation for human occupancy as a residence which may include one or more components that can be retracted for towing purposes and subsequently expanded for additional capacity, or two or more units separately towable but designed to be joined into one integral unit, as well as a single unit; except that the definition does not include recreational vehicles or modular or premanufactured homes, built to Uniform Building Code standards, designed to be permanently affixed to real property;

T. "offering" means any advertisement, inducement, solicitation or attempt to encourage any person to acquire any interest in a unit, other than as security for an obligation. An advertisement in a newspaper or other periodical of general circulation or in any broadcast medium to the general public of a condominium not located in New Mexico is not an offering if the advertisement states that an offering may be made only in compliance with the law of the jurisdiction in which the condominium is located;

U. "person" means a natural person, corporation, business trust, estate, trust, partnership, association, joint venture, governmental entity or other legal or commercial entity;

V. "purchaser" means any person other than a declarant or a person in the business of selling real estate for his own account who by means of a voluntary transfer acquires a legal or equitable interest in a unit other than:

(1) a leasehold interest, including renewal options, of less than twenty years; or

(2) as security for obligation;

W. "real estate" means any leasehold or other estate or interest in, over or under land, including structures, fixtures and other improvements and interests which by custom, usage or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance, and includes parcels with or without upper or lower boundaries and spaces that may be filled with air or water;

X. "residential purposes" means use for dwelling or recreational purposes, or both;

Y. "special declarant rights" means rights reserved for the benefit of a declarant to:

(1) complete improvements indicated on plats and plans filed with the declaration;

(2) exercise any development right;

(3) maintain sales offices, management offices, signs advertising the condominium and models;

(4) use easements through the common elements for the purpose of making improvements within the condominium or within real estate which may be added to the condominium;

(5) make the condominium part of a larger condominium or a planned community;

(6) make the condominium subject to a master association; or

(7) appoint or remove any officer of the association or any master association or any executive board member during any period of declarant control;

Z. "time share" means a right to occupy a unit or any of several units during five or more separated time periods over a period of at least five years, including renewal options, whether or not coupled with an estate or interest in a condominium or a specified portion thereof;

AA. "unit" means a physical portion of the condominium designated for separate ownership or occupancy, the boundaries of which are described pursuant to Section 17 [14] [47-7B-2 NMSA 1978] of the Condominium Act; and

BB. "unit owner" means a declarant or other person who owns a unit, or a lessee of a unit in a leasehold condominium whose lease expires simultaneously with any lease the expiration or termination of which will remove the unit from the condominium, but does not include a person having an interest in a unit solely as security for an obligation.

History: Laws 1982, ch. 27, § 2.

Bracketed material. — The bracketed material was inserted by the compiler and is not part of the law.

Compiler's notes. — This section is similar to § 1-103 of the Uniform Condominium Act, with the following main exception: Subsections R and S of this section were not set forth in the Uniform Condominium Act.

COMMISSIONERS' COMMENT

1. The first clause of this section permits the defined terms used in the act to be defined differently in the declaration and bylaws. Regardless of how terms are used in those documents, however, terms have an unvarying meaning in the act, and any restricted practice which depends on the definition of a term is not affected by a changed term in the documents.

EXAMPLE:

A declarant might vary the definition of "unit owner" in the declaration to exclude himself in an attempt to avoid assessments for units which he owns. The attempt would be futile, since the act defines a declarant who owns a unit as a unit owner and defines the liabilities of a unit owner.

2. The definition of "affiliate of a declarant" (§ 1-103(1)) [Subsection A] is similar to the definitions in 12 U.S.C. § 1730(a) [§ 1730a], which prescribes the authority of the federal savings and loan insurance corporation to regulate the activities of savings and loan holding companies, and in 15 U.S.C. § 78(c)(18) [§ 78c(18)], which defines persons deemed to be associated with a broker or dealer for purposes of the federal securities laws.

The objective standards of the definition permit a ready determination of the existence of affiliate status to be made. Unlike 12 U.S.C. § 1730(a)(2)B [§ 1730a(a)(2)(D)], no power is vested in an agency to subjectively determine the existence of "control" necessary to establish affiliate status. Thus, affiliate status does not exist under the act unless these objective criteria are met.

3. Definition (2) [Subsection B], "allocated interests," refers to all of the interests which this act requires the declaration to allocate. See § 2-107 [47-7B-7 NMSA 1978].

4. Definitions (4) and (25) [Subsections D and AA], treating "common elements" and "units," should be examined in light of § 2-102 [47-7B-2 NMSA 1978], which specifies in detail how the precise differentiation between units and common elements is to be determined in any given condominium to the extent that the declaration does not provide a different scheme. No exhaustive list of items comprising the common elements is necessary in this act or in the declaration; as long as the boundaries between units and common elements can be ascertained with certainty, the common elements include by definition all of the real estate in the condominium not designated as part of the units.

5. Definition (7) [Subsection G], "condominium," makes clear that, unless the ownership interest in the common elements is vested in the owners of the units, the project is not a condominium. Thus, for example, if the common elements were owned by an association in which each unit owner was a member, the project would not be a condominium. Similarly, if a declarant sold units in a building but retained title to the common areas, granting easements over them to unit owners, no condominium would have been created. Such projects have many of the attributes of condominiums, but they are not covered by this act.

6. Definition (8) [Subsection H], "conversion building," is important because of the protection which the act provides in § 1-112 [47-7A-12 NMSA 1978] for tenants of buildings which are being converted into a condominium. The definition distinguishes between buildings which have never been occupied by any person before the time that the building is submitted to the condominium form of ownership, and buildings, whether new or old, which have been previously occupied by tenants. In the former case, because there have been no tenants in the building, the building would not be a conversion building, and no protection of tenants is necessary.

7. Definition (9) [Subsection I], "declarant," is designed to exclude persons who may be called upon to execute the declaration in order to ratify the creation of the condominium, but who are not intended to be charged with the responsibilities imposed on declarants by this act if that is all they do. Examples of such persons include holders of pre-existing liens and, in the case of leasehold condominiums, ground lessors. (Of course, such a person could become a declarant by subsequently succeeding to a special declarant right.) Other persons similarly protected by the narrow wording of this definition include real estate brokers, because they do not offer to dispose of their own interest in a unit. Similarly, unit owners reselling their units are not declarants because their units were "previously disposed of" when originally conveyed.

The last bracketed clause in this definition must be deleted in any state which chooses not to enact Article 5 of the act.

8. Definition (11) [Subsection K], "development rights," includes a panoply of sophisticated development techniques that have evolved over time throughout the United States and which have been expressly recognized (and regulated) in an increasing number of jurisdictions, beginning with Virginia in 1974.

Some of these techniques relate to the phased (or incremental) development of condominiums which the declarant hopes, but cannot be sure, will be successful enough to grow to include more land than he is initially willing to commit to the condominium. For example, a declarant may be building (or converting) a 50-unit building on parcel A with the intention, if all goes well, to "expand" the condominium by adding an additional building on parcel B, containing additional units, as part of the same condominium. If he reserves the right to do so, i. e., to "add real estate to a condominium," he has reserved a "development right."

In certain cases, however, the declarant may desire, for a variety of reasons, to include both parcels in the condominium from the outset, even though he may subsequently be obliged to withdraw all or part of one parcel. Assume, for example, that in the example just given the declarant intends to build an underground parking garage that will extend into both parcels. If the project is a success, his documentation will be simpler if both parcels were included in the condominium from the beginning. If his hopes are not realized, however, and it becomes necessary to withdraw all or part of parcel B from the condominium and devote it to some other use, he may do so if he has reserved such a development right "to withdraw real estate from a condominium." The portion of the garage which extends into parcel B may be left in the condominium (separated from the remainder of parcel B by a horizontal boundary), or the garage may be divided between parcels A and B with appropriate cross-easement agreements.

The right "to create units, common elements, or limited common elements" is frequently useful in commercial or mixed-use condominiums where the declarant needs to retain a high degree of flexibility to meet the space requirements of prospective purchasers who may not approach him until the condominium has already been created. For example, an entire floor of a high-rise building may be intended for commercial buyers, but the declarant may not know in advance whether one purchaser will want to buy the whole floor as a single unit or whether several purchasers will want the floor divided into several units, separated by common element walls and served by a limited common element corridor. This development right is sometimes useful even in purely residential condominiums, especially those designed to appeal to affluent buyers. Similarly, the development rights "to subdivide units or convert units into common elements" is most often of value in commercial condominiums, but can occasionally be useful in certain kinds of residential condominiums as well.

9. Definition (12) [Subsection L], "dispose" or "disposition," includes voluntary transfers to purchasers of any interest in a unit, other than as security for an obligation. Consequently, the grant of a mortgage or other security interest is not a "disposition," nor is any transfer of any interest to a person who is excluded from the definition of "purchaser," infra. However, the term includes more than conveyances and would, for example, cover contracts of sale.

10. Definition (15) [Subsection O], "leasehold condominium," should be distinguished from land which is leased to a condominium but not subjected to the condominium regime. A leasehold condominium means, by definition, real estate which has been subjected to the condominium form of ownership. In such a case, units located on the leasehold real estate are typically leased for long terms. At the expiration of such a lease, the condominium unit or the real estate underlying the unit would be removed from the condominium if the lease were not extended or renewed. On the other hand, real estate may not be subjected to condominium ownership, but may be leased directly to the association or to one or more unit owners for a term of years.

This distinction is very significant. Under § 3-105 [47-7C-5 NMSA 1978], the unit owners' association is empowered, following expiration of a period of declarant control, to cancel any lease or recreational or parking areas or facilities to which it is a party, regardless of who the lessor is. The association also has the power to cancel any lease for any land if the declarant or an affiliate of the declarant is a party to that lease. If the leased real estate, however, is subjected by the declarant to condominium form of ownership, that lease may not be cancelled unless it is unconscionable or unless the real estate was submitted to the condominium regime for the purpose of avoiding the right to terminate the lease. See § 3-105 [47-7C-5 NMSA 1978].

While the subjective test of declarant's "purpose" may not always be clear, the rights of the association to cancel a lease depend upon the test. Thus, for example, a declarant who wishes to lease a swimming pool to the unit owners would have a choice of subjecting the pool for, say, a term of 20 years to the condominium form of ownership as a common element. At the end of the term, the lease would terminate and the real estate containing the pool would be automatically removed from the condominium unless there were a right to renew the lease. During the 20-year term, the lease would not be cancellable, regardless of the terms, unless it were found to be unconscionable under § 1-112 [47-7A-12 NMSA 1978], or cancellable because submitted for the purpose of avoiding the right to cancel. On the other hand, if the pool were not submitted to the condominium form of ownership and was leased directly to the association for a 20-year term, the association could cancel that lease 90 days after the period of declarant control expired, even if, for example, 18 years remained of the term.

In either case, the terms of the lease would have to be disclosed in the public offering statement.

11. Definition (20) [Subsection V], "purchaser," includes a person who acquires any interest in a unit, even as a tenant, if his tenancy entitles him to occupy the premises for more [less] than 20 years. This would include a tenant who holds a lease of a unit in a fee simple condominium for one year, if the lease entitles the tenant to renew the lease for more than four additional years. Excluded from the definition, however, are mortgagees, declarants and people in the business of selling real estate for their account. Persons excluded from the definition of "purchaser" do not receive certain benefits under Article 4 [Article 7D], such as the right to a public offering statement (§ 4-102(c) [47-7D-2C NMSA 1978]) and the right to rescind (§ 4-108 [47-7D-8 NMSA 1978]).

12. Definition (21) [Subsection W], "real estate," is very broad, and is very similar to the definition of "real estate" in § 1-201(16) of the Uniform Land Transactions Act.

Although often thought of in two-dimensional terms, real estate is a three-dimensional concept and the third dimension is unusually important in the condominium context. Where real estate is described in only two dimensions (length and width), it is correctly assumed that the property extends indefinitely above the earth's surface and downwards toward a point in the center of the planet. In most condominiums, however, as in so-called "air rights" projects, ownership does not extend ab solo usque ad coelum, because units are stacked on top of units or units and common elements are interstratified. In such cases the upper and lower boundaries must be identified with the same precision as the other boundaries.

13. Definition (23) [Subsection Y], "special declarant rights," seeks to isolate those rights reserved for the benefit of a declarant which are unique to the declarant and not shared in common with other unit owners. The list, while short, encompasses virtually every significant right which a declarant might seek in the course of creating or expanding a condominium.

Any person who possesses a special declarant right would be a "declarant", including any who succeed under § 3-104 [47-7C-4 NMSA 1978] to any of those rights. Thus, the concept of special declarant rights triggers the imposition of obligations on those who possess the rights. Under § 3-104 [47-7C-4 NMSA 1978], those obligations vary significantly, depending upon the particular special declarant rights possessed by a particular declarant. These circumstances are described more fully in the comments to § 3-104 [47-7C-4 NMSA 1978].

14. Definition (24) [Subsection Z], "time share," is based on § 1-102(14) and (18) of the Uniform Law Commissioners' Model Real Estate Time-Share Act.

15. Definition (25) [Subsection AA], "unit," describes a tangible, physical part of the project, rather than a right in, or claim to, a tangible physical part of the property. Therefore, for example, a "time-share" arrangement in which a unit is sold to 12 different persons each of whom has the right to occupy the unit for one month does not create 12 new units - there are, rather, 12 owners of the unit. (Under the section on voting (§ 2-110 [§ 3-110] [47-7C-10 NMSA 1978]), a majority of the time-share owners of a unit are entitled to cast the votes assigned to that unit.)

While a separately described part of the project is not a unit unless it is designed for, and is subject to, separate ownership by persons other than the association, the association developer can hold or acquire units unless otherwise provided in the declaration. See, also, Comment 4.

16. Definition (26) [Subsection BB], "unit owners," contemplates that a seller under a land installment contract would remain the unit owner until the contract is fulfilled. As between the seller and the buyer, various rights and responsibilities might be assigned to the buyer by the contract itself, but the association would continue to look to the seller (for payment of any arrears in common expense assessments, for example) as long as the seller holds title.

The definition makes it clear that declarants, so long as they own units in the condominium, are unit owners and are therefore subject to all of the obligations imposed on other unit owners, including the obligation to pay common expense assessments against those units. This provision is designed to resolve ambiguities on this point which have risen under several existing state statutes.

Compiler's notes. — The reference to Section 17 of the Condominium Act in Subsection AA is seemingly incorrect. Section 14 of the Condominium Act, compiled as 47-7B-2 NMSA 1978, describes the boundaries of condominium units.

The references to 12 U.S.C. § 1730 and 15 U.S.C. § 78 throughout Comment 2 seem incorrect, as the subject matter described is not contained in these provisions. Corrections, in brackets, were made to refer to the seemingly correct provisions.

The reference to § 2-110 of the uniform act in the last sentence of the first paragraph of Comment 15 seems incorrect, as § 2-110 deals with the exercise of development rights. Section 3-110 of the uniform act deals with voting.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 15A Am. Jur. 2d Condominiums and Cooperative Apartments §§ 1-4, 12, 13.

Owners: expenses for which condominium association may assess unit owners, 77 A.L.R.3d 1290.

Time-share or interval ownership interests: regulation of time-share or interval ownership interests in real estate, 6 A.L.R.4th 1288.

Standing to bring action relating to real property of condominium, 74 A.L.R.4th 165.

31 C.J.S. Estates § 153 et seq.