real estate principles and practices chapter 13 condominiums and cooperatives © 2014 oncourse...
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Real EstateReal Estate Principles and Practices Principles and Practices
Chapter 13Chapter 13
Condominiums and CooperativesCondominiums and Cooperatives
© 2014 OnCourse Learning
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© 2014 OnCourse Learning
Key TermsKey Terms
Air lot
Bylaws
Common elements
Condominium
Cooperative
Declaration
Homeowners’ association
Horizontal Property Act
Master deed
Proprietary lease
Time-sharing
Townhouse
Unit conversions
Vacation license
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OverviewOverview
Condominium Condominium
Word derived form Latin “for exercising domain with others”
Individual ownership of single-family unit with joint ownership of common areas
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OverviewOverview
Condominium
Townhouse
Cooperative
Time-share
Vacation license
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Creation of a Condominium Creation of a Condominium RegimeRegime
Master deed Master deed and declaration are filed
Regime: Regime: governing system of a condominium complex
DeclarationConverts property to single deed estates
Description of units & common area Establishes undivided
interest percentages Places authority with BOD
of homeowners associationhomeowners association
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Creation of a Condominium Creation of a Condominium RegimeRegime
Horizontal Property Act: Horizontal Property Act: provides for ownership of a specific unit with an undivided interest in the whole area
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Condominium OwnershipCondominium Ownership
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Single-family ResidenceSingle-family Residence
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High-rise Condominium High-rise Condominium
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Creation of a Condominium Creation of a Condominium RegimeRegime
Declaration: Declaration: states covenants, restrictions, and conditions
Bylaws: Bylaws: provide for homeowners association
Developer controlled until no longer majority owner
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Creation of a Condominium Creation of a Condominium RegimeRegime
Assessments and feesAssessments and fees
Establishment of operating budgetEstablishment of operating budget
Rules governing recreation areasRules governing recreation areas
Provision to maintain insuranceProvision to maintain insurance
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Creation of a Condominium Creation of a Condominium RegimeRegime
BOD and officers are elected by the membersBOD and officers are elected by the members
Governing body provides for:Governing body provides for:
Operating budgetOperating budget
Collection of charges and assessmentsCollection of charges and assessments
Notice to lenders of unpaid assessmentsNotice to lenders of unpaid assessments
Rules for common areaRules for common area
Rules for recreational areasRules for recreational areas
Refuse collection, water, sewer, andRefuse collection, water, sewer, and outside lightingoutside lighting
The AssociationThe Association
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Creation of a Condominium Creation of a Condominium RegimeRegime
Funds for unexpected expenses
Buyer should ask for financial statement
Owners responsible for deficits
Reserve FundsReserve Funds
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Creation of a Condominium Creation of a Condominium RegimeRegime
Individual deed in fee simple title
Separately assessed taxes
Ability to individually mortgage
Title insurance
Interest in common areas and facilities
What the Condominium Owner What the Condominium Owner ReceivesReceives
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Creation of a Condominium Creation of a Condominium RegimeRegime
Levied against individual units
Dues assessed by the ratio of the individual unit to the total units
Delinquency fees for unpaid dues
Foreclosure
Taxes and AssessmentsTaxes and Assessments
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Creation of a Condominium Creation of a Condominium RegimeRegime
Common elements: land and exterior surfaces
Interior common areas
Recreational area
Limited common element: limited to an individual owner
Limited and Common Limited and Common ElementsElements
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Creation of a Condominium Creation of a Condominium RegimeRegime
1. Amenities
2. Reduced maintenance
3. Security
4. Peace of mind during absence
5. Camaraderie
6. Social involvement
The Best of Both WorldsThe Best of Both Worlds
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Creation of a Condominium Creation of a Condominium RegimeRegime
77. Pride of ownership
8. More living space
9. Minimized upkeep
10. Location
The Best of Both WorldsThe Best of Both Worlds
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Creation of a Condominium Creation of a Condominium RegimeRegime
1. Lack of privacy
2. Limited private outdoor space
3. Restrictions and rules
4. Majority rule
5. Parking
The Best of Both WorldsThe Best of Both Worlds
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ConversionsConversions
Change the use of real estate
1977 - 25% of condos were conversions
Deferred maintenance concerns
Urban area conversions include old warehouses, offices, school buildings
Disclosure on resale required in some states
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CooperativesCooperatives
Purchase stock in a nonprofit corporation, partnership, or trust
Principal asset is the building
Proprietary lease: Proprietary lease: occupancy of a particular unit
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CooperativesCooperatives
Shareholder is responsible for pro rata share of expenses
Tax deductible
Default by one results in risk for all stockholders
Shareholders determine who may purchase stock
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Time-SharingTime-Sharing
Time-sharing:Time-sharing: joint ownership
“Buying time”
Legal structure for time-sharing plans
Buying an amount of time
Buying the right to use
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Time-SharingTime-Sharing
Interval ownershipInterval ownership
Undivided interest in a particular unit
Tenant in common with other buyers of the unit
Resort Areas
Annual assessments
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Exchange ProgramsExchange Programs
Time share owners swap time
Pay membership dues
Guaranteed vacation – not investment