|
|
||||
|
Steven Wolfe |
Welcome to New Jersey's Premier Statewide Brokerage
|
Best way to reach me is
by: |
|
|
Main Menu
|
Understanding Property TypesTable of Contents
IntroductionCondominium, Cooperative and Fee Simple are “methods of ownership”, and are sometimes confused with being “building types”. There are important legal differences between each that should be understood by the potential buyer of each type. Below is a basic definition of each term, and things to consider when purchasing these types of properties. CondominiumsCondominium is a legal definition for the “method of ownership” of real estate; it is not the type of a building! Ownership in a condominium community generally means you own title to the interior space of your unit, and jointly own the land and all of the other physical and mechanical structures supporting the infrastructure of that community. These supporting structures include such items as; elevators, hallways, recreational facilities, outside grounds, parking areas and usually exterior aspects of your unit like the roof and siding of the buildings. These are for the shared use of all residents of the community and are called "common elements". Townhouses:Townhouses, sometimes called town homes, are the same “method of ownership” as condominiums, where you own the individual unit along with the undivided interest in the common grounds of the community. Typically a townhouse dwelling is multi-floor and you may own the actual structure, rather than just the air space within the unit. Condominium units tend to be single floor, and setup more like apartment units where townhouses tend to be units which may have common walls with their neighbors, but have no one above or below them. Garden Conversions:As the term “conversions” implies, these are typically “Garden Apartment” complexes that have been converted to be condominium complexes. Garden Apartments implies that some or all apartments have direct access to lawn areas. In Northern New Jersey these tend to be two floor brick buildings, with many single floor apartments in each physical structure. The owner of the apartment complex decided to convert the ownership of the apartments to individual condominium units, whereby the ownership and maintenance is handled no different than how it is handled for normal Condominium complexes. However, usually the maintenance fee in these type of complexes includes such items as heat, hot water, gas, etc… As this is how the physical plants for these structures were setup when the buildings were built for their original purpose, being rental apartments. In all likelihood, you would have a separate electric bill, and possibly a separate gas bill. These units tend to cost less than equivalent space in newer condominium complexes and are a great value for the money. They are usually studio, one and two bedroom units, however you may find a townhouse or three bed room unit from time to time. Condominium Home Owners Association:Also known as HOA, is an organization of homeowners residing in a community whose purpose is to ensure the provision and maintenance of community facilities and services for the common benefit of the residents. They are usually guided by the CC&Rs (Covenants, Conditions and Rules)) of that community, and generally work with a management company to run the day-to-day operations of the community. Covenants, Conditions and Rules:Also known as CC&Rs, dictates the restrictions governing the usage of your property; usually enforced by a homeowners association. It covers such items as physical attributes of the buildings, landscaping rules, and even whether or not you can have pets and what size they may be. If the property is governed by a set of CC&Rs, the buyer must be notified of them prior to the sale completion of the property. It should be noted that CC&Rs are not just necessarily for Condominium and Cooperative communities. They may also apply to PUDs and Fee Simple properties. Management Companies:Even though the overall responsibility of the management of a condominium community is up to the HOA, the HOA generally does not have the time or the wherewithal to manage the day-to-day operations of the community. Some communities do “self-manage” their complexes, but most do hire a company that specializes in handling the operational issues of the community. Operational issues can include the handling of the various contractors that do the maintenance in the community (such as landscaping and snow removal), hiring contractors for periodic or emergency repairs, and just for handling everyday calls from the various residents of the community. Some communities go as far as hiring a full time individual to handle their complex. No matter how the community management is handled, the community manager reports to the HOA. Understanding Condominium Fees:As Condominium communities have common grounds that all unit owners have an interest in, the unit owners are obligated to pay a maintenance fee to help maintain these common areas. This generally includes: · Maintenance of the external building and common building structures · Ground keeping, such as landscaping, snow removal and repairs · Community amenities such as pool, clubhouse, play area, gym and gardens · Common utility costs, such as watering of lawns, sewage and garbage pickup and electricity · Contributions to maintaining the capital improvement reserve funds o This fund is used for major capital improvements, depending upon the community, this may include roofing, siding, streets, sidewalks, fences, elevators, and any other infrastructure or physical aspects of the common areas Yearly Budget – The Monthly Maintenance FeeThe yearly budget of the community covers the day-to-day maintenance of the complex. The yearly budget is funded by the normal assessment to the unit owners, commonly known as the monthly maintenance fee. Day-to-day maintenance items include such things as: · Landscaping (cutting the lawn, cutting the shrubs, watering lawn, …) · Snow removal (plowing, salting roads, …) · Painting (painting trim, hallways, …) · Management company fee · Clearing rain gutters · Miscellaneous repairs to the common property · Maintaining amenities such as pool, tennis courts, club house · Maintaining the capital reserve funds · … From time to time, the HOA is faced with a cost that is not in the present budget or within the ability of the capital reserve funds to cover. This is usually due to certain costs going beyond what was reasonably expected or because of some sort of unforeseen expense. When this occurs, the HOA needs to assess each unit owner a share of the overall cost to make up the difference in the yearly budget or the capital reserve funds. Budgeted overruns can be understood in variable costs, such as snow removal fees. When the yearly budget is prepared, the HOA attempts to estimate reasonable forecasts of snow removal fees; however, if it is an unusual winter, snow removal can easily go beyond what was forecasted. In this situation, the HOA will assess the unit owners with the difference in cost, and put together a reasonable payment schedule to recover these costs and put the communities budget back on track. Other costs may actually affect the capital reserve funds; such items as not enough funds for roof repair, new sidewalks, to unforeseen items, such as a pre-mature problem with the building siding. The HOA should be maintaining a current reserve study, which should be performed by an engineer to determine whether or not the capital reserve funds are adequate to cover the mechanical and structural common elements of the community. This study should be performed periodically, usually on a 5 year basis. If it is determined that the capital funds will not cover future costs, then the monthly maintenance fee will most likely be adjusted for a finite period of time to bring the capital reserve funds inline with what the study indicates is necessary to properly maintain the property. It is also possible that the HOA would request these funds in a separate payment schedule. In either case, the special assessment payments should be clearly indicated to the present owner or perspective buyers.
Cooperatives:Cooperatives, or commonly nicknamed co-ops, are a completely different type of real estate ownership to Condominiums or Fee Simple. In a cooperative, you do not actually own the title of any real estate; you own shares or a membership in a cooperative housing corporation. The corporation actually owns the real estate, and you own a certain amount of shares within that corporation. For your shares (or membership) you have an exclusive right to live in a specific unit within the complex. As in a condominium, there are maintenance fees and Covenants, Conditions and Rules you must abide by in order to maintain your right to continue to live within your assigned unit. There are many types of cooperatives, but their explanation is beyond the scope of this site. For full details on the various ownership types, please refer to the NAHC (National Association of Housing Cooperatives). Assuming that the cooperative you are interested in is a Market-rate housing cooperative, your membership or shares will reflect the going market value similarly to that of a condominium or single-family (fee simple) property. Your maintenance fees typically cover the same items as they would in a condominium community with the addition of paying your share in the corporation’s taxes and the blanket mortgage payments. See Understanding Condominium Fees for details on condominium maintenance fees. Planned Unit Developments:Also known as PUDs, is basically a subdivision that has a modified set of plans and zoning criteria that do not necessarily follow the standard zoning classifications of the master plan of the local governing authority (township, …). A developer typically applies for a variance to the master plan in order to develop the private and common areas to that subdivision. The variations to the master plan of the local governed area may include such items as; setback changes, street lighting, housing density/clustering, building architecture, land coverage ratios, common area park and amenity designs. Unlike a Condominium and Cooperative community, the individual property owners own the land underneath their homes. However, they also have a maintenance fee for handling the care of the common areas. This fee is generally not as high as those set by Condominium and Cooperative communities. Benefits of Condominium Living:What is the attraction of living in a Condominium, Townhouse or Cooperative community? The answer to this really depends upon each individual’s circumstances. There was a time in my life that I would never have dreamed of living in a townhouse, I wanted a single family home of my own, and after 22 years of living in a great home in Upper Montclair, I decided it was time to live in a Townhouse community. Why? Peace of mind, less maintenance headaches, newer structure, beautifully taken care of grounds throughout the community. Who should consider Condominium Living:There are pros and cons to every piece or real estate, and these pros and cons change for each of us as our life circumstances change.
Pros to Condominium Living:
|
|
|
|