Condominium and PUD Ownership

Understanding Common Interest Developments (CIDs): Condos vs. PUDs

Builders are increasingly using Common Interest Developments (CIDs), such as Condominiums and Planned Unit Developments (PUDs), to maximize land use and offer housing with convenient amenities. It's important to remember that these terms refer to types of interests in land and ownership rights, not the physical style of the dwelling (e.g., a townhouse can be a PUD or a Condominium).

Essential Characteristics of CIDs

All Condominiums and PUDs share these four characteristics:

 

1. Common ownership of private residential property.
2. Mandatory membership of all owners in an association that controls the use of the common property.
3. Governing documents (CC&Rs and Bylaws) that establish rules for the association and the use of individual units/lots and common areas.
4. A means by which owners are assessed to finance the operation and maintenance of the common properties.

Condominium vs. PUD Ownership

The primary difference lies in the individual owner's interest:

 

• Condominium Owner: Owns 100% of the unit (the airspace defined by the walls, floors, and ceiling) and a fractional or percentage interest in all common areas of the project.
• PUD Owner: Owns the lot (and the structure/improvements on it) shown on the map and receives rights and easements to use the common areas, which are typically owned by the Homeowner's association.

Common Areas and Assessments

Common areas range from roadways and utility rooms to swimming pools and golf courses. Your rights to use them are detailed in the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and Bylaws.

Homeowner’s assessments finance both immediate upkeep (like landscaping and pool maintenance) and long-term costs like association management, insurance, and reserves for replacement of items like roofs and plumbing (especially critical for Condominiums). Upon purchase, you must receive a pro forma operating budget detailing the association's finances and how replacement obligations are funded.

Importance and Risk of Governing Documents

The CC&Rs and Bylaws are highly important and should be thoroughly examined before purchase, as they can restrict not only property use but also owners’ lifestyles (e.g., setting hours for parties). Failure to follow them can be considered a breach of contract, leading to legal action.

Reviewing Documents

The seller must provide the governing documents, the latest financial statement, and notice of any delinquent dues as soon as practicable. You should request these items as early as possible and consult a real property attorney if you don't fully understand them.

Objecting to Restrictions

No, you cannot terminate objectionable restrictions prior to taking ownership. Termination is complex, costly, and requires at least a majority vote by the Homeowner's association members, possibly requiring litigation.

Consequences of Delinquent Assessments

If you fail to pay assessments, the association will add delinquency fees, has the right to place a lien upon your property, and may proceed to foreclosure if the delinquency is not paid.

Ask any questions you may have before you buy! Don't wait until you take ownership to find out about restrictions and regulations affecting your Homeownership rights.