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The In-Betweens: PUDs and Condos

No, Virginia, a Homeowner's Association (HOA) is not a support group. It is, though, a group into which you'll be drafted if you purchase a home that is part of a condominium development or a planned unit development. The term Homeowners' Association, or HOA, simply refers to the people who own units in a particular condominium development.

Condominiums
First, for clarity's sake, understand that the term condominium or "condo" refers to both a single unit you might buy and the legal form of ownership you acquire when you buy a unit.

Condos are similar to co-ops in that they are generally comprised of a number of attached residential homes in a building or a complex of buildings. However, the condo as a legal form can technically be applied even to detached residences on a single lot. Condos are most often stacked vertically, on top of one another, but this form of ownership is also frequently applied to townhouses, which are stacked next door to each other, sharing side walls but not ceilings or floors.

When you buy a condo, you become the exclusive owner of your living space -- usually called a unit -- and your parking space(s), while at the same time obtaining shared ownership with your neighbors of portions of the property called the "common area." Most often, the common area includes laundry areas (though some condos have in-unit laundry), community parking spaces, hallways or outdoor walkways, and recreational areas like greenbelts, clubhouses, pools, tennis courts, and gyms. In newer, larger and/or more progressive condo communities, you might even see an on-site business center with access to fax machines and the Internet, a DVD library with free popcorn and cookies, or the entire ground floor devoted to a public gym or supermarket. The common area also may include the four exterior walls, ceiling/roof, and sometimes the floor of an upstairs unit; maintenance problems in the walls or the roof are usually the Homeowners Association's responsibility to repair.

When you pay dues to the HOA, you pay for:

• Your homeowner's insurance (the HOA obtains insurance on the whole building, and just charges you for your share);


• Common area maintenance (landscaping, cleaning, repairs, improvements);


• Gas (sometimes - if gas lines are shared between units);


• Water (sometimes - if water heaters are shared between units).

The property flyer or MLS listing will generally specify the amount to be paid monthly to the HOA by the buyer of a particular unit, though these amounts do increase every year or so. Often, the property description will give a brief, bullet point explanation of costs covered or amenities paid for by the HOA dues.

Like co-ops, condo HOAs also elect boards of directors, but there are usually no provisions for the board to have input into who can buy a unit. Also, like co-ops, condos are usually managed by a property manager, and condo owners are subject to permanent covenants, codes and restrictions (CC&Rs) governing things like pets, alterations to units, items you may have on your balcony or porch, noise, and so on?basically, anything that might impact your neighbors' ability to enjoy their units.

Pros: You write fewer checks monthly, as many of your monthly costs are rolled into your HOA dues. Also, lots of potentially major unexpected repair costs are liable to be covered by your HOA. Between the HOA and a home warranty, you can drastically reduce your risk of big repair costs. Access to on-site recreational facilities and convenience amenities can be a big plus, if you use them.

Cons: Your HOA dues might be more expensive than the total of your water, gas, maintenance and insurance costs would be otherwise; the overage usually goes to pay the management company and to create a reserve fund for repairs and maintenance. Some HOAs don't manage money well, or are involved in major litigation that threatens the Association's ability to actually cover large dollar repairs and maintenance items. Other HOAs have deferred maintenance on the property, which can lead to expensive repairs down the line which you, as a member of the HOA, will have to help fund. If the reserves aren't healthy enough to finance a large repair, you could wind up being assessed a significant sum of money (translation: thousands of dollars) in addition to your monthly dues. Communal living is inherently less private, and condos that were converted from rental apartments often lack soundproofing. It's no fun to have to hear the guy upstairs flush the toilet or handle other unmentionables. You may need to seek approval for some interior upgrades or alterations.

Planned Unit Developments (PUDs)
PUDs are basically detached single family homes in a subdivision or other "master planned" community which offers amenities and benefits above and beyond those made available by the local municipal government. Similar to single family homes, the owner of a home in a PUD possesses exclusive ownership of the lot of land on which the building sits, the actual building, and everything within the four walls. The common areas in a PUD are generally streets and parking areas, community centers or clubhouses, parks and open spaces, and other recreational facilities.

The Homeowners' Association in a PUD usually does little more than hold title to these areas and retain a property manager to maintain and repair them. Individual owners are responsible for insuring and maintaining their homes and yards (though front yard maintenance can sometimes be an HOA responsibility), but are bound by relatively non-restrictive CC&Rs. Common examples of CC&Rs binding PUD home owners include limitations on exterior paint color, putting up basketball hoops over the garage, and prohibitions on vehicle parking in driveways and on streets. While HOA dues for PUDs are proportionally much lower than those for condos and co-ops, they generally cover nothing but common area maintenance. It is important to note that in many states, subdivisions less than 10 years old are generally PUDs, and owners therein are often required to pay special taxes or assessments intended to fund the increased burden the subdivision created on police, fire and other municipal services. If such a special tax applies, it will often be disclosed up front in the property listing or flyer. If you do not see it there, it is legally required to be disclosed within days after you make an offer.

Pros: This is just as private as living in a detached family home, but may have lower maintenance responsibilities. Communities have a uniform standard for aesthetics and maintenance, and contain no weird purple-and-orange-and-yellow houses. HOA dues are generally quite low.

Cons: Restrictions on paint colors and parking can be annoying. Uniform appearance standards can give the neighborhood a Stepford feel. HOA dues don't really substitute for any other costs you would have to pay if your home were not in a PUD.

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