The mechanism works and it is genuinely used, mostly on new construction where the sponsor writes the documents before anyone owns anything. Retrofitting it onto an existing twelve-plus-four is a different exercise.
Start with the lender. An existing mortgage almost certainly encumbers the whole legal parcel, and subdividing that parcel into condo units without written consent will trip the covenant against transfer or further encumbrance. You'd be asking the current lender to release and re-record against two new units, and a bank with a performing loan has no reason to say yes unless a payoff is on the table. Condominium creation is a state law process, so the filing requirements, any public offering statement obligation, and the recording mechanics all depend on your state, and this is one to run through a real estate attorney who has actually filed a declaration in that state.
On the operating side, thicket has the important point. Two-unit associations deadlock. Fixed percentages by square footage are cleaner than voting on each expense, and I'd want a reserve funding schedule with mandatory contributions plus a remedy if one unit fails to pay, typically a lien plus the right of the paying unit to advance funds and collect interest. Elevator allocation is the usual fight, because retail rarely uses it and residential can't function without it.
The cost side is what usually kills it at small scale. Survey, plans, legal drafting, and recording on a two-unit conversion run well into five figures before you close a single loan, and the two loans carry two sets of origination and title costs. Weigh that against the interest saving on twelve units of residential debt over the years you actually intend to hold.
The exit is the honest reason to do this. A residential condo of twelve apartments has a much deeper buyer pool than a mixed-use building where every bidder has to underwrite retail. If you don't plan to sell the halves separately, the structure is expensive plumbing for a benefit you'll never use.
