Real Estate Principles and Practices Chapter 13 Condominiums and Cooperatives © 2014 OnCourse...

Real EstateReal Estate Principles and Practices Principles and Practices

Chapter 13Chapter 13

Condominiums and CooperativesCondominiums and Cooperatives

© 2014 OnCourse Learning

© 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