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, it 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 and 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 development.
Common interest developments offer many advantages to homebuyers, such as 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.
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 percentage interest in all common areas of the condominium project.
The owner(s) of a lot within a PUD own the lot that 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 that is a homeowner’s association in 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 will I Be Acquiring Use of and How Will I Own Then? – Common interest areas may span the spectrum from the ordinary building, roadways, walkways and utility rooms to the extravagant equestrian trails and golf courses. The more usual amenities include 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).
Condominium owners own a fractional or percentage in common with all others in the condominium project. 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 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 assess for purposes of maintaining common areas
Check your CC and R’s and association bylaws to insure that you understand your rights to use of your unit and common area.
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.
Reserves must also be factored into your assessments, including reserves for replacements 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 the 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 to the unpaid assessments. Should your delinquency continue, the association has the right to place a lien upon your property. The lien may lead to 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 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, 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.
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.