Condominiums and Cooperatives

Condominiums and cooperatives are forms of common-interest ownership of property. Some state laws or statutes refer to them jointly as common-interest communities. Common interest developments (CIDs) are types of communities that are maintained by community associations or homeowner associations (HOAs).

Real property that is part of a condominium project or planned community may be subject to one or both of the following:

• Uniform Common Interest Ownership Act (UCIOA) 
• Uniform Condominium Act (UCA)

The UCIOA and UCA are model templates that states can follow in creating statutes that govern CIDs. These laws will affect the rules in governing documents created by owners' associations. Property owners in condos and cooperatives share common elements. Thus, the documents regulate their ownership interests.

Covenants, conditions, and restrictions (CC&Rs) and bylaw amendments restrict unit owners. HOA board members or board of directors can require residents in condominiums and cooperatives to:

• Maintain certain decor in their units
• Respect their neighbor's rights of way in common areas
• Refrain from keeping certain kinds of animals
• Control noise levels

The UCIOA and UCA may guide the extent and legality of these restrictions. In general, federal and state laws invalidate CC&Rs that violate public policy. For example, governing documents that discriminate against homeowners will violate housing laws. HOA rules that violate the law cannot be enforced in court.

Condominiums

By far the most popular form of common ownership is the condominium. A condominium, or condo, is characterized by separate ownership of identified portions of property. Some examples of condo ownership include:

• Individual apartment in a multi-unit building
• Undivided or joint ownership of the remainder, such as the common areas of that apartment building

The most common form of a condominium is the residential, high-rise apartment-style building, but the condominium concept is not limited to this form. Condominiums exist in commercial real estate settings, such as office condominiums. They also exist in other residential forms, such as condominium townhouses.

A condominium is a form of ownership, not a type of building. Existing apartment buildings can be turned or converted into condominiums. Condominiums can be changed back into traditional apartment buildings. Condominium units can be bought and sold individually. Each can be transferred with a separate deed and mortgage, as would be the case if each were a separate single-family home. At the same time, each condominium owner retains an undivided interest in the common areas, such as:

• Hallways
• Exterior grounds
• Landscaping and the like

In general, the condominium is created by a condominium declaration. The declaration includes, among other provisions:

• Descriptions of the units and common areas
• Any material restrictions on the occupancy or use of the units

Condo Management

The condominium is managed by the Condominium Association, which:

• Is composed of the owners of the individual units
• Makes and enforces rules, much like the landlord of a traditional apartment building
• Sets and collects the dues and maintenance fees necessary to maintain the structure
• Manages the common areas

The rights associated with a common-interest ownership will also be governed by state law. All fifty states have passed statutes governing condominiums. Some have passed broader statutes governing common-interest communities in general.

Any prospective condominium buyer should have an understanding of:

• The restrictions and conditions contained in the condominium's declaration
• The rules and regulations established by the association
• The powers of the association

In any common-interest community, much of what an owner can do is governed by a vote of the owner's neighbors. That includes maintaining the property and its facilities, as well as paying fees and assessments.

Cooperatives (Co-ops)

A cooperative is also a form of shared or common-interest ownership, but it is much less common than a condominium. Real estate cooperatives are formed on the same theory as other cooperative organizations. Examples of cooperative organizations include banking or credit cooperatives. They are owned by and operated for the benefit of those using the organization's services.

There is a major difference between a condominium and a cooperative. The co-op distinction is that each owner does not have outright ownership of any specific, identifiable unit. Rather, title to the entire property is held by the cooperative, usually a corporation. The residents own stock in that corporation. As shareholders, the residents elect directors to manage the building. In turn, the co-op corporation provides each resident with a long-term renewable lease to their specific apartment unit.

Having Issues? Contact a Lawyer

Consulting with a real estate attorney experienced in condominium and cooperative law can go a long way. It ensures that prospective purchasers know what they are buying into. Additionally, a lawyer can help explain an owner's rights if and when a dispute arises.