The Essentials of Common Interest Communities

The Essentials of Common Interest Communities

There are three types of common interest communities in my state of Connecticut and in most states.  They are condominiums, planned communities and cooperatives.  Each state has its own version of these but the descriptions provided below are similar throughout the states.  This article will be about the basics of homeownership of each.

Cooperatives

I’ll start with cooperatives first to get it out of the way.  This is the one of that I know the least about for two reasons: (1) there aren’t many in Connecticut and (2) they have nothing to do with FHA condominium approvals.  I know what they are and learned about them when I took my Real Estate class in 2001 to become licensed as a salesperson.

Cooperatives are a form of common interest ownership whereby the owner buys a share in a corporation.  The corporation owns everything: the buildings, the units, the land and all improvements on the land which could include garages, parking, pool and tennis courts.  When the shareholder purchases into a cooperative, he/she owns a share of the entire corporation which includes a living area that is solely for his/her use.

So, in essence, the person is buying a share of the corporation and is given exclusive access to a living area.  Of course, the buyer chooses which space to inhabit – much like the buyer of a house – but the shareholder really doesn’t “own” anything except a share in the corporation.  Cooperatives are commonly high-rise structures (especially in the NYC area) but can come in all forms.  My cousin lives in one in Western Massachusetts that is a community consisting of manufactured housing.

Enough about cooperatives.  On to more fun stuff…

Condominiums

Condominiums are a form of common interest ownership whereby the unit owner purchases a unit in the condominium project which also includes appurtenances.  The appurtenances that accompany a purchase into a condominium community vary from project to project but generally include the common elements and limited common elements.  Each unit owner has an undivided percentage of ownership interest in the common elements and limited common elements.

The unit is the physical space that unit owner actually owns and lives in.  This can vary greatly amongst condominium projects.  This article describes the principal varieties of condominium units.

The appurtenances are a percentage of ownership interest in the common elements that are included with each unit.  With condominiums, the unit owners own a specified percentage of the common elements, which is everything that exists outside of the units but within the boundaries of the community.

For example, if the unit boundaries are the vertical walls from the basement floor to the roof rafters, everything that exists outside of this area is designated as common elements.  This means that every unit owner has a percentage of ownership to your front steps, patio or deck and parking space.

Limited common elements are common elements but are delegated for use only by unit owner to which they are assigned.

An example of this would be a deck attached to your unit.  If this is outside of the unit boundaries, then every unit owner in the community has a percentage of ownership in your deck.  However, because it is a limited common element, you have the exclusive right to use the deck.  This is also true of patios, parking spaces and even front steps or any other elements (such as mechanical features) that are delegated for the sole use of a specific unit owner.

Because each unit owner has an undivided percentage of ownership interest in your deck, all unit owners collectively own the deck; however, no one unit owner can come to your deck and claim that a specific 6 square inches is his.

Planned Communities or Planned Unit Developments (PUDs)

Ownership in a planned community or PUD is very much like that of a condominium.  Each owner owns his unit and everything within the unit boundaries.  The unit boundaries can include just the interior of the unit; the interior and exterior; or the interior, exterior and a piece of land.  The buildings can be stand-alone or grouped together like townhomes.

The major distinction between a planned community and a condominium is that the unit owners do not have an undivided percentage of ownership interest in the common elements.  The HOA owns the common elements.  Each unit owner is a member of the HOA which collectively owns the common elements.  However, when there is a transfer of title, the owner only transfers the unit because there are no appurtenances as with condominiums.

For more information about common interest communities: the Association, Monthly Fees and Legal Documents, please visit The Essentials of Common Interest Communities Part Deux.

Cooperative photo: photo credit: La Citta Vita via photopin cc

High rise condo photo: photo credit: compujeramey via photopin cc

The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA.  We have assisted more than 100 condominiums and we can help your association.

 

ReadySetLoan is an active member of the Connecticut chapter of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.

 

Please contact us with any questions regarding FHA or VA condominium project approvals.  You can email me at askeric@readysetloan.com or call me at 404-433-4565. I will be happy to answer any of your questions.

 

FHA/VA Condo Approval Specialist
404-433-4565 Cell Phone

860-644-3772 Fax Phone

eric.boucher@readysetloan.com

 

 

 Check out our article in Common Interest magazine on page 19!

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