From the September, 2002 issue of of The Title Insurance Law Newsletter
The Wisconsin Supreme Court holds that the conversion of an existing marina to condominium ownership is prohibited under a statute barring the transfer of riparian rights by easement, and also that the condominium declaration is invalid because the units are too small for "independent use."
The Abbey Harbor marina was built in 1962 by the dredging of a harbor from dry land and a channel connecting it to Geneva Lake. The marina grew to include 407 boat slips and many related amenities, all adjacent to a resort. The slips were rented to the public. The state DNR issued a series of marina permits to the owner.
In 1995, the then-owner, ABKA Limited Partnership, filed a condominium declaration to convert the marina to condominium ownership. The Wisconsin DNR said that the project required a new permit for conversion to condominium ownership, although a regulation to that effect does not exist. ABKA submitted an application under protest. The DNR said it would approve the declaration only if the units were on dry ground. ABKA defined the units as four-by-five-by-six inch lock boxes. Each unit included, "as an appurtenance, standard riparian rights of owners of waterfront real estate under Wisconsin Law, and the use of an assigned boat slip."
A lake owners' association objected to the permit. The DNR director wrote a letter authorizing the sale of 185 units while the permit was contested. After a hearing, an administrative law judge issued a permit, but allowing only 120 units to be used by their owners, and requiring the balance of 287 to be rented to the public. The circuit court affirmed the permit.
The lake owners appealed, arguing that the condominium regime violated the public trust doctrine by allowing the surface of the water to be cut up and sold. The appeals court agreed, and struck down the permit.
The Supreme Court affirmed, but on different grounds. First, it held that the lock boxes were not valid units. The Wisconsin condominium law describes a "unit" as "a part of a condominium intended for any type of independent use." The court said the lock boxes did not meet that test. "Rather," it said, "they are phantom units that do not meet with the statutory definition." The court also termed the lock boxes "a sham" and "a conduit for another use."
In short, ABKA's condominium declaration as approved by the DNR fails to create valid units under § 703.02(15) because the units defined in ABKA's declaration have no independent use. Because there are no valid units, there is not a valid condominium conveyance of real property.
Rather than find the declaration simply null, however, the court chose to recharacterize it:
Without a valid condominium unit, the transfer of riparian rights that ABKA's declaration purports to accomplish is in violation of § 30.133, which provides that "no owner of riparian land that abuts a navigable water may convey, by easement or by a similar conveyance, any riparian right in the land to another person
."
