Real Estate - Level 2, Chapter 3 (condos, CO-OPS, etc.)

The Purchase and Sale Agreement

The GCA requires the declarant to share certain information with the first buyer of a condo unit. When that buyer resells the unit, they don't have to worry about these disclosures. It's only for the person buying a brand-new condo.

lease hold (co-op)

The co-op corporation is merely leasing the building and/or land beneath, according to the lease terms agreed upon between the co-op corporation and underlying landowner. A leasehold co-op is also known as a ground-lease or landlease building. The co-op doesn't actually own the land that the co-op is on. They lease it from the owner. Leases can last awhile — even 50 or 100 years — but if the lease is up and there's no renewal, the tenants will be evicted.

rescission period

The number of days that a prospective owner has to revoke, repeal, or cancel a purchase agreement; buyers have seven days after they receive the disclosure to cancel the contract, so get the disclosure package to the client as soon as possible if any of the information in the disclosure package changes before the sale closes, or if the declarant fails to include any of the required items in the package, the buyer gets another seven days to cancel the contract with no penalty.

condominiums/condos

They can be apartments that share walls with other units, or stand-alone units clustered on a property. Condo owners only own the inside of their residential unit. For this reason, condos are sometimes called "walls-in" properties (because you own everything from the walls in).

What Kind of Common Interest Ownership Property Are We Looking at Here? 1. Is owned fee simple absolute from the walls in 2. Is owned as a tenant in common everywhere else; including the roof, inside the walls, the common elements, etc. 3. Requires the owners to pay a monthly maintenance fee 4. Is painted a lovely shade of yellow

a condo

TIMESHARE

a separate estate with right to use for a specific time of year

plats

a visual representation of the EXTERIOR of the development

floor plans

a visual representation of the legal boundaries of each unit

A condo owner has private roof access from their unit. The roof needs repairs. Who is responsible for paying for these repairs?

all of the condos co-owners

common elements

anything shared that is owned by everyone; outdoor hallways, swimming pool, parking lot, laundry room, etc.

townhomes

are another kind of common interest ownership property. can be a condo are set up as PUD's

condo rules are made by?

condo board or HOA board

Condo owners own both the unit AND land on which their unit stands. T or F?

false

Why is it important to review a co-op's financial statements?

if the co-op doesn't have a large enough reserve fund, an emergency could mean extra assessments or losing the building

planned unit development/PUD

is another kind of common interest ownership property. They can consist of attached townhouses or unattached homes, but they are differentiated from condos by the fact that a buyer purchases both the structure itself AND the land it sits on. As with condos, common elements are shared. Unlike condos, PUD ownership includes the land beneath the dwelling and the outside of the dwelling.

why purchase a condo?

less maintenance, no yard to deal with, and often more affordable

What is the BEST way Zoe and Orion could ensure the co-op building is a sound investment?

look at the bldgs board minutes and financial statements

maintenance fees/HOA's

monthly fees that condo and/or co-op owners pay for common area expenses; the fees are disclosed to the perspective buyer.

limited common elements

owned by everyone, but only a few owners use (ex. parking space #9 is owned by all, but only used by Bob)

CO-OP

share of the corporation that owns the building

If something happened to the terrace off Unit 6 of the Loft at the Granary, who would be responsible for the repairs?

since it is a common element, repairs would come out of the condos maintenance funds

fee simple (co-op)

the co-op owns the bldg and its full bundle of rights of rights in perpetuity; the corporation owns the bldg in the same way that a homeowner owns a single family home

incorporating

the declarant will need to file articles of incorporation with the Georgia Secretary of State and adopt bylaws for the management of the property. These don't need to be filed anywhere, but they should keep track of them anyway.

CC&Rs are usually put in place by whom?

the developer

disclosure package

the ten listed items are known as this

Board Minutes

viewing these are the best way to get the dirt on the co-op. You'll learn about disputes between shareholders, any pending litigation, and more. Juicy tidbits from these minutes might be things like: 1. The building's underlying mortgage (interest rate, date of maturity of loan, etc.) 2. The building's reserve fund Information regarding noise, pet problems, or other tenant issues 3. Maintenance history 4. Indications of future plans (lobby renovation, roof replacement, etc.)

PUD

your building, the ground below, a share in common elements

CONDO

your unit from walls in, a share of the common elements

PUD owners have these two types of ownership:

fee simple absolute and tenancy in common

What's the difference between fee simple ownership and leasehold ownership?

fee simple is of unlimited duration; leasehold is of limited duration

covenants, conditions, and restrictions (CCR's)

Also known as deed restrictions or restrictive covenants, they are rules attached to the property by a developer. address things like how a property can be used or restrictions on building height, setbacks, acceptable renovations, and other limits to what owners can do with their property.

Choose the property that fits this description: 1. The owner buys shares in a corporation that owns the building. 2. The owner receives a proprietary lease on the unit that they live in. 3. The owner pays a monthly maintenance fee.

CO-OP

condo vs co-op: similarities

1. Combine individual and joint ownership 2. Share common areas with co-owners 3. Pay fees to fund the costs of repairs and maintenance 4. Obey bylaws and CC&Rs

the 3 documents needed to build a condo -

1. declaration 2. floor plans 3. plats

types of common interest ownership properties

Condos Co-ops Planned unit developments (PUDs) Timeshares

board interview

to be allowed to purchase shares in a co-op, prospective buyers must be approved by the co-op's board. The board is an elected body of co-owners. Board interviews start with a board package, a packet of financial and personal information the potential buyer supplies to the board. Agents are usually responsible for preparing their client's board packages, and making it look good is one of the most important jobs a buyer's agent has in a co-op transaction. If you end up working with a lot of co-ops, you'll quickly learn the secrets of a killer board package -finally, a place to channel that "spotlessly organized Trapper Keeper" energy. If the board package is accepted, the potential purchaser will have a board interview. This is like a job interview and a date, all wrapped in one, nerve-wracking bow. 🎁 Board interviews range from perfunctory to CIA interrogation, depending on the area, price range, and building's "personality." However, most co-op applications are rejected for financial, not personal, reasons.

co-op boards

*have much more power than condo boards (since the whole building is jointly owned) *they have strict rules; about things like the number of people who can live in a unit, the type and number of pets allowed, quiet hours, carpet coverage (to minimize stompy foot noise from upstairs neighbors), acceptable renovations, and whether or not it is permissible to sublet a unit (and for how long)

Co-ops/cooperative

*is a building owned by a cooperation where residents are shareholders in the cooperation *each shareholder has the right *each share holder has a proprietary lease *rather than owning the unit itself, owners have shares of stock in the corporation or cooperative *these owners live in the apartments they lease, but don't actually own them *the shareholders pay a monthly maintenance fee *there is often a full-time maintenance person or "super." *if owners want to carry out renovation on their unit, they usually have to get approval from the co-op board

condo vs co-op: differences

1. Co-op shareholders own personal property (shares), while condo owners (and homeowners) own real property. 2. A co-op is member-controlled and owned, while a condo is a non-controlling entity. 3. One co-op shareholder's actions can threaten the entire community, which is not true for condo owners (or homeowners).

to create a new condo in Georgia -

1. File three documents in the land records (housed in the Superior Court) of each county the development is located in. If it straddles several counties, documents must be filed in each. 2. Incorporate an entity to manage the condo. This entity will have no ownership stake, it will just run the condo.

considerations when thinking about purchasing a co-op -

1. Many co-ops do not allow long-term subleases, and therefore aren't options for investors. 2. They would have to pass a board interview. 3. They would need to take a very careful look at the co-op's financials and board minutes. 4. A high maintenance fee would cut into their monthly profits.

PUD advantages -

1. Owners own both the building and the land it sits on. For many people, owning actual, tangible land is important. 2. Owners get the use of common element amenities without having to maintain them. 3. Common elements may be amenities like pools or fitness centers that an owner wouldn't otherwise be able to afford: By combining resources and land, co-owners have more buying power. 4. Owners get more private space than a condo or co-op owner. Condo and co-op owners don't have private yards, and their ceilings will be someone else's floor - unless they're living on the top floor. 5. Denser living configurations mean more walkable, bikeable communities. A PUD can be a good choice for someone who wants a smaller carbon footprint, but doesn't want to live in an apartment. 6. You own the dwelling, including the walls, roof, foundation, exterior, and interior 7. You own the land beneath the dwelling 8. You own the small yard included with the dwelling 9. You own a share in the rest of the land and common elements

Common elements for a PUD development could be things like -

1. Parks 2. Playgrounds 3. Athletic centers and gyms 4. Pools 5. Parking lots 6. Roads and sidewalks connecting stand-alone townhomes 7. Duck ponds 8. Those weird fountains that spray pond water up from the middle of a pond in fancy developments

declaration

1. The declaration will outline any liens, CC&Rs, or easements 2. have a verbal description of the legal boundaries of the units 3. list any limited common elements and assign them to their designated units; and outline the percentage of common element ownership for each unit.

the Public Offering Statement MUST INCLUDE:

1. The name and contact information of the developer 2. The address of the timeshare being offered 3. A description of the developer's ownership interest in the project 4. Whether or not the interest being sold involves real property ownership 5. The nature of the interest being sold 6. A description of the development, including projected completion dates, what they look like, and how many will be offered as timeshares 7. A description of the budget for the project, if it's not yet built 8. Any common charges or facilities or amenities fees the buyer will be expected to pay 9. Any closing costs the buyer will pay, and why 10. A description of any liens, defects, or encumbrances to title 11. A description of financing offered by the developer 12. A description of any insurance provided by the developer, or a statement that none will be provided *There are also multiple mandatory statements that have to appear in various places on the offering statement informing consumers of their rights related to the purchase of timeshares. They are too big to share here, but can be found on Georgia's government website.

PUD disadvantages -

1. You pay an HOA fee even if you don't care to use the common elements. 2. PUDs offer less privacy than most single-family homes — there is no exclusive right to use common elements, and homes are often close together or even attached. 3. Unlike with a condo or co-op, the owner is responsible for repairs and maintenance to things like the roof, the HVAC systems, and the foundation. 4. You may have grass to mow and/or landscaping to maintain. 5. Unless there is a CC&R preventing it, they would not need to get permission to lease their unit.

The Georgia Condominium Act

1. a law governing condo ownership 2. In Georgia, a condo is simply defined by the legal relationship owners have to the land and each other. It can be an office building, malls, boat slip. 3. if something has individual units owned exclusively by a buyer AND common elements that are jointly owned by all co-owners, in Georgia, it's a condo 4. The boundaries of the individual units and common elements will be spelled out in a condo's declaration. It will be literally written out, in words, exactly where a unit begins and ends. 5. a law regulating all condos built after July 1, 1975.

co-op disadvantages

1. can be a risky form of ownership. 2. If owners default on their monthly payments, it could result in the foreclosure of the property. All the owners would lose everything in a foreclosure. There's a reserve fund to try to prevent this. The reserve fund is also used to fund big projects and emergency repairs. 3. they have a lot of rules about what you can do with "your" unit 4. it's all for one, and one for all, as one resident's actions can harm the entire community. 5. they also have the power to interview and reject potential buyers for any reason other than membership in a class protected by the Fair Housing Act.

before purchasing a co-op -

1. check that the co-op is in good financial standing 2. Are there unpaid bills? 3. Are payments late or even absent altogether? 4. How much is in the reserve fund? 5. have a lawyer do is a due diligence check on the board minutes. The board minutes are the best way to get the dirt on the co-op. You'll learn about disputes between shareholders, any pending litigation, and more.

types of PUD ownership

1. fee simple interest ownership - of the individual unit (including the garage, roof, private yard, patio, and the land beneath it all) 2. tenancy in common ownership - of all common areas

condo ownership

1. it's a "fee simple absolute ownership interest" in the interior of the individual unit. 2. Owners possess the common elements as "tenants in common," which you'll remember means that they have an undivided interest in them, but can own them in unequal shares. Everyone has the equal right to use all of the common elements, regardless of their proportional share of the ownership. 3. if something breaks inside your condo unit, fixing it is your problem. If something breaks anywhere else, it's everyone's problem.

property manager managed condos

1. larger buildings are set up this way 2. the company is usually put in place by the developer 3. the company ensures that preventative maintenance is done on the building and common elements, pay taxes and common area utility bills, and can even help market units that are for sale 4. the mgr charges a fee for their services 5. a more expensive way to go

self-managed condos

1. lower maintenance fee 2. require a lot more work 3. you do your own maintenance; mowing grass, etc. 4. if HOA's are low, you may need to pay for community repair out of your pocket (ex. new building roofs)

timeshares

1. own time at a vacation property, generally not sound investments 2. are a form of shared property ownership, sometimes referred to as interval ownership. 3. multiple owners have the right to use a property (commonly located in a desirable vacation spot) for a specified period each year 4. agreements can vary. Usually, an owner has the right of exclusive use to the unit during the same time each year (or a different specified period). 5. each unit is considered an estate or interest in real property, separate and distinct from all other timeshare estates in the same unit or any other unit. Therefore, estates may be separately conveyed and encumbered. 6. these agreements are affected by various federal and state statutes, as well.

About PUD's -

1. owners may have their own roofs, garages, and private yards or patios. These are owned exclusively by the dwelling's owner. 2. Usually there is a homeowner's association that is responsible for maintenance of the common elements 3. can come with CC&Rs, or deed restrictions, that are attached to each home's deed; these deed restrictions are enforced by the HOA, and if that doesn't work, other residents would have to take the offending resident to court.

What do cooperative members own?

1. shares of the cooperation that owns the building(s) 2. A proprietary lease on your unit 3. Access to all the common elements

condos, co-ops, and PUD's -

Here are some things you could have told them: - Condos are owned from the walls in fee simple, then you co-own the rest of the building/development with the other people in the building. Pros: low-maintenance, own your own unit, more flexibility and fewer rules than a co-op. Cons: less private space, you pay a maintenance fee, and you don't get to pick your neighbors. - Co-op buyers invest in a corporation and get a proprietary lease. Pros: as part of the board, you choose your neighbors; they are often more affordable. Cons: less freedom to do what you want with the unit; if the building defaults on their loan, you lose your investment; not much private space; you pay a monthly maintenance fee (often a higher one than a condo). - PUD owners own their dwelling and the land below fee simple, and they are also co-owners of the common elements. Pros: amenities that you don't have to do maintenance on, more private space, more financial stability, more freedom. Cons: HOA dues

The Georgia Timeshare Act

It requires a mandatory, seven-day "cooling off" or rescission period, during which the buyer can cancel the contract (the seven-day period excludes holidays and Sundays.) This helps to protect consumers from the high-pressure sales techniques sometimes employed by timeshare sales agents. Georgia's law covers any property sold in Georgia, even if it's located somewhere other than Georgia. It also specifies that anyone purchasing a timeshare in Georgia must be given (and confirm receipt by signature of) a public offering statement.

limited common element example

Maria's apartment has a terrace. A terrace juts out into the air, so everyone in the condo owns it, but Maria is the only one who uses it since the only access is through her unit. If Maria's terrace needed repairs, everyone in the building would pay.

There are two passages from the GCA that have to appear in bold or CAPITAL letters, in a font no smaller than the largest font on the rest of the page. They are:

Oral representations cannot be relied upon as correctly stating the representations of the seller. For correct representations, reference should be made to this contract and the documents required by code section 44-3-111 of the "Georgia Condominium Act" to be furnished by a seller to a buyer. And This contract is voidable by the buyer until at least seven days after all of the items required under code section 44-3-111 of the Georgia Condominium Act to be delivered to the buyer have been received by the buyer. The items so required are: 1. A floor plan of the unit 2. The Declaration and Amendments thereto 3. The Association's Articles of Incorporation and bylaws and Amendments thereto 4. Any ground lease 5. Any management contract having a term in excess of one year 6. The estimated or actual budget for the condominium 7. Any lease of recreational or other facilities that will be used only by the unit owners 8. Any lease of recreational or other facilities that will or may be used by the unit owners with others 9. A statement setting forth the extent of the seller's commitments to build or submit additional units, additional recreational or other facilities, or additional property 10. If this contract applies to a condominium unit which is part of a conversion condominium, a statement describing the condition of certain components and systems, a statement regarding the expected useful life of certain components and systems, and certain information regarding any notices of violations of county or municipal regulations. A dated, written acknowledgment of receipt of all said items signed by the buyer shall be prima facie evidence of the date of delivery of said item 11. There are numerous other disclaimers required to be in the sales contract if they apply to the project or the situation. In all cases, these disclosures must be printed in bold or CAPITAL LETTERS in a font that is no smaller than the largest type on the first page of the contract.

Choose the property that fits this description: 1. The owner owns the entire dwelling fee simple absolute, including the land below the building. 2. The owner owns common elements in the neighborhood as a tenant in common. 3. The owner pays a monthly HOA fee. What are we looking at here?

PUD - planned unit development