Don’t buy a Condominium (Condo) before reading these posts.
These are one of those posts you’re going to want to bookmark, take notes and share with others. The definitions below also apply to townhouses and homes in planned community developments. Whether you’re buying for your personal residence or as an investment this post is packed with a lot of important info on what buyers need to know when buying a condo ( formal term: condominium). Why do you need to know all this, you ask? It’s because buying a condominium it’s not exactly the same as buying a single family house. There are different rules, guidelines, and costs associated with owning a condo.
Definition of a condominium/condo for short:
Single, the individually-owned housing unit in a multi-unit building. The condominium owner holds sole title to the unit, but owns the land and common property (elevators, halls, roof, stairs, etc.) jointly with other unit owners, and shares the upkeep expenses ( HOA fees) on the common-property with them. Unit owner pays property taxes only on his or her unit, and may mortgage, rent, or sell it just like any other personal property.
Below are very important factors one needs to know when buying a condo because not everything is exactly how it states above in the technical definition of a condo.
What is a Homeowner’s Association ( HOA )?
An HOA is an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties and their residents. Those who purchase property within an HOA’s jurisdiction automatically become members and are required to pay dues, known as HOA fees. Some associations can be very restrictive about what members can do with their properties.
What are HOA fees?
A homeowners association fee (HOA fee) is an amount of money that must be paid monthly by owners of a condominium,
property in a planned community or subdivision and HOAs collect these fees to assist with maintaining and improving
properties in the association. For condominium owners, HOA fees typically cover the costs of maintaining the building’s common areas, such as lobbies, patios, landscaping, swimming pools, and elevators.
What is a Special Assessment?
The HOA may levy special assessments from time to time if its reserve funds are not sufficient to cover a major repair,
such as a new elevator or new roof. HOA fees can also apply to single-family houses in certain neighborhoods, particularly if there are common amenities such as tennis courts, a community clubhouse, or neighborhood parks to maintain.
What are HOA reserves?
Reserve accounts (also referred to as “reserve funds” or simply “reserves”) are funds set aside by the homeowner association ( HOA )to pay for the replacement or repair of community property. Reserves are intended to prevent the need for special assessments.
What are By-Laws?
The rules and regulations an owner is governed by and residents whether an owner or renter need to follow. These are created by the HOA and are self-governed by the HOA. So rules relating to things like board meetings, special assessments, building insurance, rent rules, rules when doing interior renovations etc. Basically anything and all things that have to do with running the condominium and the building as a whole.
What are CC&Rs?
Covenant, Conditions & Restrictions
These are the guidelines for the planned community and are meant to maintain the value of the units in the planned community. So you could see rules like what people can do with their front lawns, balconies, windows anything on the outside of the unit that would affect the community as a whole. Rules regarding smoking, pets, and usage of common areas like fitness rooms or pools are also commonly found in CC&Rs. Violating the CC&R’s could lead to an HOA lawsuit against an owner and fines.
Read our follow up blog: Condo Buying Questions – Here we will explain why the above are so important and provide important questions you should always ask before buying a condo.