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Builders, in an
effort to combat the dual problem of an increasing
population and a declining availability of prime land, are
increasingly turning to common interest developments (CIDs)
as a means to maximize land use and offer homebuyers
convenient, affordable housing.
The two most common forms of common interest developments in
many states are Condominiums and Planned Developments, often
referred to as PUDs. The essential characteristics shared by
these two forms of ownership are:
1. common ownership of private residential property;
2. mandatory membership of all owners in an association
which controls use of the common property;
3. governing documents which establish the procedures for
governing the association, the rules which the owners must
follow in the use of their individual lots or units as well
as the common properties; and
4. a means by which owners are assessed to finance the
operation of the association and maintenance of the common
properties.
Before continuing further, it may be helpful to clarify a
common misconception about Condominiums and PUDs. The terms
Condominium and PUD refer to types of interests in land, not
to physical styles of dwellings. Therefore, when homebuyers
say that they are buying a townhouse, that is not the same
as saying that they are buying a Condominium. When
homebuyers say that they are buying a unit in a PUD, they
are not necessarily buying a single-family detached home. A
townhouse might legally be a Condominium, a unit or lot in a
Planned Development, or a single-family detached residence.
The terms Condominium or PUD will say a great deal about the
ownership rights the buyer will receive in the unit and the
interest they will acquire in the common properties or
common areas of the development.
Common interest developments offer many advantages to
homebuyers-low maintenance and access to attractive
amenities-however, there are restrictions and duties which
come with ownership of a Condominium or PUD that buyers
should be aware of prior to purchase.
To acquaint you with various aspects of ownership in common
interest developments, the Land Title Association has
answered some of the questions most commonly asked about
Condominiums and PUDs.
What are the basic differences between ownership of a
Condominium and ownership of a PUD?
The owner(s) of a unit within a typical Condominium project
owns 100% of the unit, as defined by a recorded Condominium
Plan. As well, they will own a fractional or percentage
interest in all common areas of the Condominium project.
The owner(s) of a lot within a PUD own the lot which has
been conveyed to them-as shown in the recorded Tract Map or
Parcel Map-and the structure and improvements thereon. In
addition, they receive rights and easements to use in common
areas owned by another-frequently a homeowner's
association-of which the individual lot owners are members.
The above are basic descriptions and should not be
considered legal definitions.
Besides ownership of my unit, what other amenities
(common areas) will I be acquiring use of and how will I own
them?
Common interest areas may span the spectrum from the
ordinary-buildings, roadways, walkways and utility rooms-to
the extravagant-equestrian trails and golf courses-with more
usual amenities including community swimming pools and
clubhouse facilities.
Your ownership rights in common areas will be spelled out in
your project's Declaration of Covenants, Conditions and
Restrictions (CC and R's). The subject of CC and R's will be
expanded upon later in this brochure.
As we stated in the answer to the previous question,
Condominium owners own a fractional or percentage interest
in common with all other owners in the Condominium project,
in all common areas. PUD owners receive rights and easements
to use of common areas through their membership in a
homeowner's association, which typically owns and controls
the common areas. Some PUD projects, however, provide that
the individual homeowners will own a fractional interest in
the common areas. Again, in this case, a homeowner's
association will have the right to regulate the use of the
common areas and to assess for purposes of maintaining the
common areas.
Check your CC and R's and association Bylaws (basically,
rules governing the management of the development) to insure
that you understand your rights to use of your unit and
common areas.
What services will my homeowner's assessments help to
finance?
Your homeowner's assessments support not only the easily
recognizable-building and swimming pool upkeep, landscape
maintenance-but also the unseen-association management and
legal fees and association insurance.
As well, reserves must be factored into your assessments,
including reserves for replacement of such items as roadways
and walkways. In the case of Condominiums, where ownership
is usually limited to airspace within the walls, floors and
ceiling of the unit, reserves will frequently fund
replacement of such items as roofs and plumbing.
Each member of the homeowner's association, upon purchasing
their unit, must receive a pro forma operating budget from
the association. Basically, this will be a financial
statement of the income and obligations of the association,
which must include an estimate of the life of the
obligations covered under the assessments and how their
replacement is being funded.
What happens if I fail to pay my homeowner's assessments?
Delinquency fees will be added onto the unpaid assessments.
Should your delinquency continue, the association has the
right to place a lien upon your property. The lien may lead
to a foreclosure if the delinquency is not paid.
Of what importance are CC and R's and Bylaws?
CC and R's and Bylaws are the rules and regulations of the
community, meant to guide the use of individual properties
and common areas. Buyers should be aware that CC and R's and
Bylaws may be written so as to restrict not only property
use, but also to restrict owners' lifestyles, for instance,
spelling out hours during which entertainment, such as
parties, may be hosted.
CC and R's and Bylaws are highly important and should be
thoroughly examined and understood prior to purchase. They
bind all owners and their successors to the rules and
regulations of the community. Failure to follow those rules
and regulations can be considered a breach of contract.
Legal action may be taken against the homeowner for any such
breach.
At what point in the real estate transaction will I be
allowed to review a copy of my CC and R's and Bylaws?
Legally, it is the responsibility of the owner to provide
the prospective purchaser with the governing documents of
the development (CC and R's and Bylaws), the most recent
financial statement of the homeowner's association and
notice of any dues delinquent on the unit.
The law states that these items should be delivered as soon
as practicable; however, the prospective buyer should
request to see them as early as possible. If you do not
fully understand what is stated in these documents, consult
a real property attorney.
Should I object to items included in the CC and R's
and/or Bylaws, will I have the opportunity to terminate
those items prior to taking ownership?
No. The process required to terminate these restrictions is
often complex and costly. Termination of restrictions will
require, at least, a majority vote by members of the
homeowner's association, and may require litigation.
What if I have further questions regarding Condominium
and PUD ownership?
Ask any questions you may have before you buy! Don't wait to
take ownership to find out about restrictions and
regulations affecting your homeownership rights.
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