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Condominiums, Co-ops, and other
Multiunit Interests
CONDOMINIUMS & CO-OPS
• History
• 1970’s• Demographics
• Economy
• Housing costs
• Interest rates
• Life style
• Politics
• Vision
• Regulatory response
• Issue of reserves
Model Acts and Law Applicable to Multi-Unit Housing
• Uniform Condominium Act
• Horizontal Property Acts or Horizontal Property Regimes
• Model Real Estate Cooperative Act
• Model Real Estate Time-Share Act
• Uniform Common Interest Ownership Act
• Uniform Planned Community Act
Types of Multiunit Housing
• Hybrids• Patio homes• Garden homes• Combinations of above
• Condominiums• Townhouses• Cooperatives• Time-sharing
properties
Creating a Condominium Ownership Interest
• Compliance with conversion requirements
• Declaration of condominium or declaration of horizontal property regime and covenants or declaration of covenants, conditions, and restrictions (CC&Rs or CCRs).
• Master deed
• Incorporation (in most cases)
• Individual deeds (for each unit owner)
Content for Declaration of Condominium
• Legal description of the property.
• Detailed description of the building or buildings making up the complex, and the number of stories, basements, and units.
• Mailing address of each unit and a physical description including the number of rooms, method of access, and other identifiable characteristics.
• (continued on next slide)
Content for Declaration of Condominium
• Detailed description of the common areas.
• Limitations on the use of common areas.
• Monetary value of the building and each unit.
• How votes are to be assigned—per unit basis or per value basis.
• (continued on next slide)
Content for Declaration of Condominium
• Restrictions on land use; for example, all-adult restrictions.
• Name and address of legal representative for the development.
• Voting procedures.
• Methods for amending the declaration of condominium.
• Other restrictions
Condominium
• Fee simple interest
• Undivided fractional interest in common areas
• Fees
• Special assessments
• Reserves
Creation of a Cooperative
• History
• Incorporation
• Acquisition of all land interest in corporate name
• Bylaws and restrictions
• Issuance of shares to owners of units
• Execution of proprietary leases for each unit owner
• Tenant-shareholder
• Tax aspects
• Transfers
Content of Cooperative Incorporation
• Corporate name
• Purpose of the corporation (cooperative)
• Share structure, including voting rights and transferability
• Name of legal agent or representative
• Structure of the board of directors and makeup on initial board
• Provisions for amendment to the articles
Creation of Townhouses
• Declaration of Covenents, Conditions and Restrictions (CCRs or CC&Rs)
• Articles of incorporation (in some states and/or for ownership of common areas)
• Bylaws
• Regulations
Creation of Time-Sharing Interests
• Recreational leases
• Proprietary leases
• Fee simple, with limitations on time of possession
• Vacation license (considered the sale of a security and regulated by the SEC)
The Common Factor in All Multi-Unit Housing Forms
• Owners’ Associations
• CCR’s
• Uniform Planned Community Act
The Purposes of an Owners’ Association
• Maintains common areas
• Arranges for delivery of services
• Taxes members through regular and special assessments to pay for amenities and services
• Protects neighborhood aesthetics and real estate values by enforcing the declaration
The Governance Mechanisms of Owners’ Associations
• Governing board elected by owners
• Bylaws
• Fees and assessments
• Fines for noncompliance and failure to pay
• Planned Community Acts
Content of Owners’ Association Bylaws
• Composition of a governing board or committee for the association and the methods and requirements for election of its members.
• Details for meetings, such as place, time, notice, quorum, requirements, and voting processes.
• Procedures for day-to-day maintenance authorization, equipment replacements, and routine repairs.
• (continued on next slide)
Content of Owners’ Association Bylaws
• Amount of any association fees to be collected from unit owners for maintenance of common areas, and so on; the methods for collecting such fees; and the penalties for late payment or nonpayment. (See the discussion on enforcement for authority of associations for collection.)
• Procedures for amending the bylaws.
• Use restrictions, such as adult-only restrictions and limitations on transfer and rental.
Recommendations for Avoiding Litigation
• Enforce all the rules quickly and uniformly. Singling out owners for enforcement will give courts a reason for setting aside the rule and the enforcement.
• Try other avenues for enforcement such as loss of voting privileges, ongoing but minimal fines, and loss of privileges on a temporary basis.
• Be certain the rules are formally adopted and properly recorded as necessary.
• (continued on next slide)
Recommendations for Avoiding Litigation
• Maintain minutes and records of meetings when rules are adopted so that a court could examine the intent of the owners and their governing body in adopting the rules.
• Include a cost/benefit analysis of the rule in the adoption process.
• Provide in the rules that attorneys’ fees are recoverable when there is litigation.
• Liability issues and insurance.
Judicial Review of Owners’ Association Enforcement of Rules
• Reasonableness test
• Business judgment test
• Contract law test
Sources of Owners’ Association Litigation
• Enforcement of rules
• Modification of structure
• Constitutional issues
• Contract disputes
• Injury to person or property
Tools for Enforcement
• Fees and fines
• Liens (with statutory limitations)
• Foreclosure (with statutory limitations)