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Vanderbilt Law Review

First Page

321

Abstract

Although the establishment of a common element corporation will provide the unit owners with some relief from major legal problems,close examination clearly reveals that such a proposal is not a ready cure for the condominium's many drawbacks. Among the proposal's chief benefits is the elimination of unlimited, joint and several liability for the unit owners. At the same time, responsibility for liability and casualty insurance coverage will be more clearly defined with the consequent elimination of double coverage. A variety of procedural questions will also be resolved since the corporation will be directly responsible for the common areas and facilities as well as the conduct of employees. The normal residential condominium will be able to retain most of the tax advantages already available under the traditional regime. If an amendment or ruling is obtained, the property tax deduction on the common elements should also be allowed to the unit owners. Taxation of the common element corporation should be effectively eliminated by balancing assessments and income against expenses connected with the common areas and facilities. While a condominium with substantial rental income may be taxable on the rent received, this is true under the traditional as well as the proposed regime. The securities regulation aspects of establishing the proposed regime are no more prohibitive than under the traditional regime. Moreover, the residential condominium should have little trouble qualifying for an exemption under both federal and state statutes. Perhaps the most formidable obstacle confronting the new condominium regime is the numerous amendments under state and federal law necessary for its establishment. Only a great deal of time and effort will ultimately devise an adequate answer to the challenge that the condominium concept presents. The establishment of the common element corporation, however, will be a step in the right direction.

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