Condo and Homeowners Associations

Understanding Condo and Homeowners Associations

By Tre Giller, President and CEO Village Communities In many cases, buyers are looking to their REALTOR® to decipher the fine print in regard to condominium associations and homeowners' associations (HOAs). In reality, the two types of associations have many similarities; however, there are dramatic differences that REALTORS® should be aware of. Before outlining these similarities and differences, it is important to stress that every REALTOR® collect a copy of the association documents and thoroughly read through them. Before advising your clients, in most cases it's important to solicit the services of a real estate attorney. As REALTORS® we must keep in mind that we do not give legal advice. Similarities The greatest similarity between condominium associations and HOAs is that membership is mandatory by virtue of your client's purchase of a home within a particular development. Additional similarities include: Both developments have a set of governing documents that are binding upon each homeowner that dictate how the community will be managed. Both charge fees to owners for the maintenance of common areas and also require owners to follow rules outlined in the original governing documents. These documents may be changed by consent of the members -- the percentage of consent may vary. Initially, the Board of Directors is made up exclusively of the developer. Subsequent control is turned over to the individual homeowners at various stages -- depending on whether the owner lives in a condominium development or HOA. A condominium development is turned over in stages according to statute. A homeowner is elected to the board once the developer has closed 25 percent of homes in the association. The remaining control is turned over when 75 percent of the homes have closed. An HOA can be turned over to the owners at any time during the sales process. There is no mandated timeframe. The developer determines the timeframe at the initial creation of the documents or during the sales cycle.

Obtaining Condominium Documents For existing condos, the property management company will likely have the most current set of Condominium Association documents (Declaration and By-Laws). The home seller can tell you the name of their property management company. All Condominium Association documents are required by law to be filed by the developer with the county and are accessible by the public. Many counties have access to these documents on their web sites. This would be a good place to go for condo docs when helping a buyer purchase a new condo. Franklin County web site: www.co.franklin.oh.us/recorder. Delaware County web site: www.landaccess.com/sites/oh/delaware/index.php. The president or secretary of the Condominium Association is another source. If you are selling an existing condo, the seller should be able to put you in touch with Condominium Association officers. It's important to note that changes can be made to the documents by a vote of the association members. Make sure you have the most recent version of the document.

Association Fees
Each development type has its own fee structure.

An HOA generally charges yearly fees to its homeowners. Owners are usually responsible for their interior and exterior home maintenance and insurance. Association fees typically cover the common elements, including:

• Maintenance of the common grounds and facilities not associated with a platted lot
• Common insurance
• Common utilities
• Entryways, gates and ponds
• Private streets and common sidewalks
• Property management and administrative costs
• General business costs
• Property taxes on common elements
• Clubhouse and swimming pools
• Janitorial and clubhouse staffing

Condominium associations generally charge monthly fees. These fees cover the common elements listed for HOAs, plus the following:

• Limited snow removal
• Exterior maintenance of individual buildings (unless specifically eliminated from the condominium documents)
• Driveways, porches and sidewalks
• Yard care and maintenance of the entire development's common grounds

Fees are typically set by the developer and a professional property management company prior to any development.

Some documents require that fees be split equally between all units (an undivided interest), while some are split based on the square footage of each unit or other defined parameters. Fees rise and fall as budgets are evaluated annually. Ultimately, fees are determined by the level of service the individual owners wish to maintain.

It can be very difficult to determine what the condominium association is responsible for without thoroughly reviewing the documents. The unit owner is responsible for the maintenance of the inside of the unit itself and anything that solely serves that individual unit.

There are varying descriptions of what encompasses a unit, but this should be stated within the association's legal documents. Many define a unit as the undecorated interior surfaces from the lowest to highest points. This definition may include:

• Space between walls inside the unit where utility lines and wiring lie
• Crawl spaces
• Interior workings of the chimney
• Door frames, jambs and hardware
• Window sashes

It is the responsibility of the condominium association to maintain insurance for individual buildings and common elements. It is important that buyers thoroughly read the documents regarding insurance. For example, some documents provide for coverage of original structures only -- which may have had significant upgrades since the original construction, i.e. in the case of catastrophic loss, the condo insurance would not cover an owner's installation of granite countertops or hardwood floors.

Detached Condominiums
There are two types of condominiums in an association -- the standard attached condominium and a detached condominium.

What associations will cover for detached condominiums varies depending on how the association was set up. For example, the association documents may dictate that the unit owner is responsible for maintaining their own yard and external maintenance. They may also state that it is the responsibility of the unit owner to carry hazardous liability insurance. Unit owners are also required to carry interior  coverage.

Detached condominium developments more closely mirror HOAs.

Association Documents
The declaration and bylaws for either type of development are created by the developer's attorney. They are filed with the county recorder's office prior to the closing of the first home. Most developers will have these on site and available to potential homeowners. Typically a new home sales consultant will provide the buyer a copy of the condominium disclosure statement at contract.

If a REALTOR® is representing a buyer on a resale home it will be important to request the documents from the seller. If the seller is unable to provide these documents, they can be retrieved from the property management company or the county.

Property Management
Most condominium associations have a professional property management company in place. The management of a condominium association is typically more labor-intensive than an HOA because there are more assets to manage.

A professional property management company:

• Sets and enforces rules and regulations
• Monitors accounts and manages common areas
• Deals with delinquent homeowners
• Accounting
• Exterior alterations
• Addresses homeowner questions

In summary, the differences between the two forms of associations vary, but the key to understanding either type is to collect a copy of the association documents and thoroughly read through them. Without a proper understanding of the documents, REALTORS® cannot be proper advocates for their clients.

President and CEO Rowland "Tre" Giller has more than 11 years of residential real estate experience with Village Communities Real Estate, Inc., a condominium developer based in Westerville, Ohio that has developed over 50 condo communities in Central Ohio.