Do you know what a condominium association is and how they work?
As a Realtor who has been in the business for the past thirty-eight years, one of the questions I often get from buyers is what a condominium association is.
What purpose does a condominium association serve?
When you begin looking to buy a home, you may start by considering a condominium.
This type of home is often attractive to people who are either just starting in home ownership or for individuals who want to avoid all the hassle of owning and maintaining a full-size home.
When you begin looking, you will quickly come across the term “Homeowners Association” or HOA. HOAs govern many developments, but this is always the case with condominiums.
The same can be said with townhouses.
Designed to help maintain a certain standard in a neighborhood and to help keep things in good repair, HOAs are loved by some and hated by others.
From three decades of experience working with condo associations and living in communities that have them, they crucial to understand as a condo owner.
Condo living is very different than single-family homes. When all you’ve experienced is living in houses, the ownership structure can be surprising
Before making an offer, you should know what a condominium HOA is and its role and responsibilities.
What is a Condominium Association?
A COA, an association for condominium owners, governs condominium developments. This group aims to maintain each unit’s value and associated shared features.
A condo association also liaises between homeowners residing in that community and the various management entities that govern the units.
The developer who builds the property typically funds each condominium association. The developer establishes the association and the rules and regulations it will uphold and then hands it over to the community living in the properties.
A board is then elected to oversee the condo association.
The condominium HOA you enter into upon purchasing your condo will be comprised of an elected body of residents in your area.
A condominium association differs from a regular homeowners association in that there is a significant amount of commonly owned property in a condominium.
Each owner has their unit, but everyone else in the condo, for instance, shares the roof of that unit. Other shared property may include hallways, elevators, the heating system, and road or driveway access.
When you buy a condo, you agree with all other owners in your unit or the association – an agreement to upkeep your particular unit and financially contribute to maintaining the shared property that makes your unit livable.
This agreement, or entry into the condominium homeowners association, is necessary for condo life. It has benefits, but it is not without frustrations for some owners.
You can learn more about what you should know about homeowners associations in the detailed resource found here.
By the time you are done reading, you’ll understand precisely what the purpose of a condominium association is.
Noteworthy Facts and Statistics About Associations
1. A condominium association is a governing body that manages and maintains a condominium complex’s building, common areas, and facilities.
2. They are typically run by a board of directors or an elected group of homeowners.
3. The association enforces rules and regulations to maintain the condominium units’ appearance, functionality, and value.
4. Homeowners in a condominium complex pay regular fees to the association to cover maintenance expenses and fund reserves for repairs and improvements.
5. The association also handles the development’s insurance, landscaping, security, and amenity management issues.
6. Approximately 67% of condominium owners participate in association meetings.
7. Condominium associations manage more than 11 million residential units nationwide.
8. Condominium association budgets allocate an average of 25% of costs for maintenance and repairs.
9. Over 90% of condo associations have rules regarding pet ownership and restrictions.
10. The average annual increase in condominium association fees is around 3%, mirroring inflation rates.
How Does a Condominium Association Differ From a Homeowners Association?
With a homeowners association (HOA), they own all the common areas, such as pools, parking lots, lobbies, recreation centers, gyms, and other structures. All homeowners are members of the association.
A condominium association is very different. Unit owners own a percentage of all the common property. The association has no ownership of any of the real estate.
The difference is essential as it can impact policies and procedures. Ownership can also affect property taxes, insurance, and refinancing mortgages.
What is a Condo Association Property Management Company?
As the manager of a condo association, you must ensure that common areas and amenities remain pristine. From overseeing finances to assigning vendors for upkeep tasks, you must diligently fulfill these responsibilities for your community to flourish.
This boosts the quality of life for condo unit inhabitants and helps to sustain high values in their residences. A set of covenants and bylaws governs a condo association and a board composed solely of homeowners elected during an election conducted amongst neighbors.
The individuals on this panel are tasked with ensuring order within the community, safeguarding its CC&Rs from infractions, and ensuring compliance with these rules.
The management of a condo association can be a daunting responsibility. Many boards turn to an experienced property manager or HOA management company to overcome this obstacle for assistance.
Experienced professionals are invaluable assets to any condo association and can perform various tasks, such as overseeing maintenance projects, undertaking contract negotiations, and collecting dues.
The board of directors retains ultimate authority over deciding which vendors to employ and how much COA dues should be raised. Still, the division of labor affords the COA a greater chance to succeed.
Purchasing a condo within a COA signifies one’s agreement to membership in the association and acknowledgment of the CC&Rs, including regular condo dues.
What Are The Positives?
What are the benefits of a condominium association? Unlike a traditional HOA in a residential neighborhood, your condo would not function without the shared property maintained through your condo HOA dues.
This is important to remember because there are times when the oversight of the HOA may feel intrusive, and the fees you pay may come when you are low on money.
Without those fees and the rules with membership, your condo could quickly go downhill.
Your condo association makes certain things are maintained to a certain standard, including changes to the architecture, the number of pets in a unit, parking on the street, exterior maintenance, property rentals, decorations, lawn care, storage of cars and boats, and window coverings.
The condominium association ensures that everything looks nice and works as it should. It also provides that if you decide to sell, the units surrounding yours will not drag down your property value.
The homeowners association also collects condo fees to keep in a fund for necessary repairs. If it does its job well, and all members of your community pay as they should, things like roof repairs will always be done on time.
If a freak hailstorm hits, your roof will not leak before the condo association has it fixed. Thus, the stringency that may seem irritating when you are late on your HOA dues has benefits.
Enforcement of Rules and Violations
One of the significant pros of an association is the enforcement of rules, regulations, and violations. Associations also referee disputes among condo owners.
When you own a condo unit, you must follow the guidelines outlined in the covenants, conditions, and restrictions. Board members will enforce the rights of all those who live within the development.
Doing so ensures that everyone’s property values are maximized. Enforcement doesn’t always mean condo owners. Sometimes, short-term renters or tenants don’t follow the established rules.
In these cases, the management company or association will enforce the guidelines.
What Are the Potential Negatives?
What are the things you may find intrusive about a condominium association?
Depending on how difficult you find conformity, the reach of the HOA may fall a little.
Some people are frustrated with being told how they can decorate their homes, landscape their yards, and whether or not their friends can park on the street.
The condominium association will also place rules on all common areas and will probably pursue you vigorously if you are late on your dues. Some people buy a home for the freedom to do whatever they like with it.
If this is your desire, your condo association may not be your favorite group of people.
The HOA Could Have Undesirable Members
There is also the issue of governance. Although the homeowners association board is elected, it can still become populated with undesirable individuals who choose to exercise their power excessively.
Getting a note on your door every week for a new infraction is not something some people want to deal with.
Another potential problem with the board can be mismanagement. The condo association board can spend the community funds irresponsibly, fail to collect them as they should, or even embezzle them.
Granted, this does not happen often, but knowing that people are people is essential. Your condo association board will consist of regular human beings who can be prone to mistakes and dishonesty.
In a condominium, your neighbors are either right next to you or above or below you. The proximity of people creates a situation where you will need a bit of tolerance for what goes on around you at times.
You may not otherwise have these issues when sitting in your single-family home on a 1-acre lot somewhere in the country.
For all these reasons, asking questions is critical before buying a condominium. Asking the right questions in advance of purchasing a condo is crucial.
Many buyers do not quite understand how different joint ownership can be in a real estate community. More often than not, living in a condo will be a very different experience than owning a single-family home.
As with most things in life, there are pros and cons for someone living with a COA.
Understanding The Financial Health of a Condo Association is Crucial
When buying a condo, few things are more vital than determining the community’s financial health. One of the first things you should ask for from your buyer’s agent is a set of condo docs and a financial statement.
You must understand the budget and whether the owners meet their obligations by making timely payments.
One of the most crucial parts of a financial statement is the “reserve account.” You need to ensure there are ample reserves.
Reserve accounts are used for emergencies. A condominium association can have a good idea about its fixed expenses, but nobody has any control over problems that arise, such as lawsuits, storm damage, or accidents.
A condo association also has jurisdiction over charging a special assessment fee. Understanding special assessments is critical for those who have never owned a condo. Unfortunately, you may be charged an unexpected expense you didn’t financially plan for.
For example, if all the decks in the complex are at the end of their useful life, they will need to be replaced. If there is no money in the reserve account, the owners must pay additional funds on top of their standard condo fees.
Buyers should carefully review the financial documents of the condominium association. It is also wise to have a real estate attorney check them.
Understanding Insurance is Essential
The condo association fees you pay cover general upkeep and operating expenses and contribute towards the condo association insurance policy. This insurance policy covers damages to various exterior areas of the building or complex, such as the basement, roofs, parking structure, elevator, and amenities like the clubhouse, community swimming pool, or gym.
The insurance policy also offers liability coverage for any legal or medical expenses that may arise if a resident or guest experiences a slip, fall, or injury in a common area of the complex and decides to file a lawsuit seeking compensation.
For example, if someone trips and falls on the sidewalks or other areas within the grounds.
Understanding the distinction between condo association insurance and individual condo insurance is crucial. While condo association insurance covers the external areas of your condo, you are still responsible for the maintenance and repairs of the interior. Therefore, it is advisable to have an individual condo insurance policy that functions similarly to homeowners insurance.
Understanding this difference is essential to drive operations, procedures, and policies. It may also impact taxes, insurance, refinancing requirements, and more.
Knowing how the condominium association insurance works is essential. Each association has different requirements. This is another aspect of why looking over the condo docs is crucial.
The condominium documents will spell out the level of coverage the condo association provides compared to what unit owners must provide.Click To TweetIs A Condominium Association Right For You?
As you can see, knowing what a condominium homeowners association is and does is crucial if you buy a condo. This is a serious question every potential buyer must ask.
Are you willing to put up with the potential negatives for all of the positives? When buying a condo, you might not have much of a choice.
HOA-style organizations must keep condos in good shape and ensure that everyone does their part to participate in upkeep.
However, you can still ask questions about the condominium association where you are buying. A few pointed questions for current owners will give you an idea of how they like their HOA and whether you would be happy living there.
Hopefully, you now understand what a condominium homeowners association does and the potential positives and negatives of buying into an HOA!
Are there pros and cons to a homeowners association? Surely there are! You need to figure out whether being regulated is right for your circumstances. Some people love it, others not so much.
There is nothing worse than being stuck with an overbearing condominium association. You will hate yourself for purchasing a condo where an unruly HOA exists. Don’t make this mistake.
Before buying where a homeowners association exists, do plenty of research. You’ll be glad you did!
Condo Associations Near Me
Are you interested in finding a condo to purchase? You can find condo associations near your location by heading to Google. Search condo associations near me, and you will likely find helpful results.
Final Thoughts
Learning as much as possible about the association is wise when purchasing condominiums. The association will have a significant impact on your daily life.
Do your real estate due diligence on the neighborhood and the surroundings. Potential buyers who fail to do their homework often end up disappointed.
Additional Helpful References:
- What do condominium HOA fees typically cover – see the most common aspects of what a condo fee will pay for by Investopedia.
Use these additional helpful references to determine whether a condo association may suit your housing preferences.
FAQs
See frequently asked questions and their respective answers.
How Do You Participate in Decision Making Within The Community?
To participate in decision-making, there are several steps you can take. First, familiarize yourself with the association’s governing documents, such as the bylaws, rules, and regulations. This will give you a clear understanding of the decision-making processes and procedures.
Attend regular association meetings and actively discuss upcoming decisions. During these meetings, voice your opinions and concerns to ensure your perspective is heard.
Consider joining committees or task forces within the association that align with your interests or expertise. This will allow you to have a more direct impact on specific decisions related to those areas.
Lastly, stay informed by regularly reviewing communication channels such as newsletters or online platforms provided by the association.
How Are Association Fees Calculated?
The association fees are typically calculated based on a combination of factors, including the unit’s size, the amenities provided by the condominium complex, and the overall maintenance and operational costs.
The size of the unit plays a significant role in determining the fee, as larger units require more resources for upkeep. The amenities offered by the complex, such as swimming pools, fitness centers, and landscaping services, contribute to the calculation.
The more extensive and luxurious these amenities are, the higher the fees.
The condominium complex’s overall maintenance and operational costs are factored in to ensure sufficient funding for repairs, common area maintenance, insurance coverage, and other necessary expenses.
How Are the Board of Directors Elected?
Electing the board of directors for a condominium association is typically done through a democratic process involving the unit owners. The first step is to establish a clear and transparent nomination process where interested individuals can put themselves forward as candidates for the board.
Once the nominations are received, a comprehensive voting system is implemented, allowing all unit owners to vote for their preferred candidates.
This can be done either through an online platform or in-person voting at a designated location. An independent election committee oversees the process to ensure fairness and accuracy, verifying the votes and announcing the elected board members.
It is important to note that each unit owner has an equal vote, regardless of the size or value of their unit, promoting inclusivity and representation within the association.
About the Author: Bill Gassett, a nationally recognized leader in his field, provided information on what a condominium association is and what they do. He is an expert in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications he has been featured in. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 38+ years.
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