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Purchasing Condominiums and Planned Developments

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As cities continue to grow and prime land becomes scarce for development, builders are maximizing land use by offering home buyers common interest developments such as condominiums and planned developments. It is important to understand that these types of developments do not refer to a type of dwelling, but refer more to the interest in the land. The terms condominium and planned development also have bearing on the ownership rights the buyer receives in the unit or property, and the interest received in the common areas of the development.

These types of developments are often convenient and affordable for many first-time home buyers and are characterized by the following conditions:

  • Common ownership of private residential property.
  • An established board that governs and controls the use of the common property. All owners must be members of this association.
  • Documents outlining the procedures and rules that govern the association. All owners must adhere to these rules as they pertain to each individual lot or unit, as well as the common or shared property.
  • Owners finance the operation of the association and the maintenance of the building or common properties.

Limitations of Condominiums and Planned Developments

Common interest developments offer a number of advantages to homeowners, including low-maintenance living and access to amenities not often associated with homeownership. However, there are also some limitations or restrictions that potential buyers should be aware of when considering the purchase of one of these types of homes.

  • Condo owners typically own 100 per cent of their unit and a fraction of common areas in the project. However, common areas vary from project to project and ownership rights are generally specified in the project's declaration.
  • Planned development owners own their lot and building and are responsible for their own maintenance and improvements. Owners have rights to use common areas, but those areas are owned by a separate homeowner's association in which the individual lot owners are members. In some cases, planned development owners may own a percentage of the common areas, but are generally just granted use of them.
  • Owners must build a reserve fund to finance maintenance and general upkeep of the property. This reserve also pays for association management, legal and insurance fees. Reserves are usually factored into your homeowner's assessment. Upon purchasing a unit or property, owners receive an operating budget or financial statement from their association. This gives owners an estimate of their financial obligations covered under the assessments.
  • If you fail to pay your homeowner's assessment, you are charged delinquency fees. In the event of your continued delinquency, the association can place a lien on your unit or property which may result in foreclosure.
  • The association rules, guidelines and/or bylaws regulate the community, but can also restrict owner's lifestyles. For example, there may be noise bylaws or curfews specifying hours that entertaining can take place. These rules are extremely important to this type of living. All potential buyers should be aware of these rules and be willing to comply before purchasing. Failure to follow the bylaws of the association can be viewed as a breach of contract and legal action may result against the homeowner who is in violation. The seller is responsible for providing the potential buyer with a copy of the governing documents for the development.
  • Governing rules for these types of developments are generally difficult to challenge or change. It can be a costly process, and the termination of restrictions requires at least a majority vote by the members of the association or may even require legal proceedings.
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