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Definitions
Don’t be mislead by the title. We strongly
urge you to read all of these definitions. Reading our definitions will give you
lots of useful information.
The definitions in this section are focused on
Condos and Coops. General real estate terms are defined in our
Greenwich Living
web site.
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A
Assessment
A special payment called for by the board of directors of the Association to
pay for a capital improvement or repair for which funds in the reserve account
are inadequate.
B
Board Approval
A condition in the standard cooperative sales contract requiring the buyer to be
approved by the board of directors before the sale is completed. In most
instances, there are no written rules available to buyers about what will or
won’t be satisfactory to the board. Usually, approval requires an interview and
a financial statement from the buyer. Personal references may also be requested.
Board of
Directors
The Board is elected by the members of the Home Owners
Association. In addition to approving buyers of cooperative units, the Board is
normally responsible for establishing a budget, setting up reserves, collecting
common charges, making rules for the common good, as well as hiring and managing
the management company.
Budget
Condominium association boards must provide a summary of the proposed budget
to each unit owner and set a date for the owners to decide whether to ratify it.
C
Common-interest Ownership
Typically refers to either a housing
Cooperative or a
Condominium, however it can also refer to a
planned community. New common interest communities that contain no more than 12
units do not need to a public offering statement. These communities have limited
resale certificate requirements.
See our article
Choosing a Condominium or Cooperative for a discussion of the
distinctions between them.
Community Associations Institute (CAI)
CAI was formed to deal with problems with
association management. It was an educational organization then, but as problems
continued CAI made substantial changes in 1992 to its structure and became a
business trade group primarily to lobby state legislatures. In 2005, CAI dropped
its membership category for Home Owners’ Association (HOAs) since, presumably,
HOAs were consumers, users of CAI services and don’t belong in a tax benefited
group whose aim is to support the business interests of its members. CAI is
responsible for the National Board of Certification for Community Association
Managers.
CAI
Connecticut Chapter
has a good list of articles as
well as a Trade Show.
Common Charges
A monthly amount paid to the Home Owners Association to cover the Associations
costs of operating the condominium, such as: normal maintenance and repair, snow
removal, garbage pick-up, management fees, contributions to the reserve fund and
amortization of any original community mortgage. Common charges may also include
water and heat. These charges can vary significantly from Association to
Association, especially if there are amenities such as docks, swimming pools,
etc.
Condominium (Condo)
A condominium is a collection of individual home units along with the land upon
which they sit. Individual home ownership within a condominium is construed as
ownership of only the air space confining the boundaries of the home. The
boundaries of that space are specified by a legal document known as a
Declaration which is filed with
the Town of Greenwich. Typically these boundaries will include the drywall
surrounding a room, allowing the homeowner to make some interior modifications
without impacting the common area. Anything outside this boundary is held in an
undivided ownership interest by a corporation established at the time of the
condominium’s creation. The corporation holds this common area property in trust
on behalf of the homeowners as a group–-it does not have ownership itself.
The most common groupings of units are: a Multi-story building (often the best
for one floor living), attached units and detached units, "Town House".
Cooperative
(Co-op)
A high-rise building or a group of dwellings owned by a corporation, the
stockholders of which are the residents of the dwellings. It is operated for
their benefit by their elected board of directors. In a cooperative, the
corporation or association owns title to the real estate. A resident purchases
stock in the corporation which entitles him to occupy a unit in the building or
property owned by the cooperative. While the resident does not own his unit, he
has an absolute right to occupy his unit for as long as he owns the stock.
D
Declaration, Bylaws and Rules
The Declaration of Condominium describes the common interest, the property and
floor plans and establishes the general restrictions on use. It must be filed in
the Town’s land records. The Rules of Governance are usually covered under a
separate set of Bylaws. Finally, there is a set of Rules and Regulations
providing specific details of restrictions and conduct. They are established by
the Board and are more readily amendable than the Declaration or Bylaws. Typical
rules include mandatory maintenance fees (Common Charges), pet restrictions,
ability to rent a unit, parking space(s), outdoor Bar-B-Q, installing wood
floors and color/design choices visible from the exterior of the units.
H
Homeowners Association (HOA)
A homeowners association, consisting of all the owners, manages the condominium
through a board of directors elected by the membership. The Association,
depending on the number of units, may be self-managed or may hire a management
company. Common charges and Assessments must be approved by the Association.
I
Insurance
Unlike a single family home, both the
association and the unit owner carry insurance. Usually the association carries
insurance to protect the association (including unit owners) against problems
with the physical plant and common areas, liability, employee misconduct and
other related risks. The best rates are generally given to associations where
rentals do not exceed 25% of the total number of units. A high number of rental
units may also affect your ability to mortgage your unit. The Unit owner’s
insurance company will want to know what coverage is maintained by the
association so that the insurance risks can be balanced properly.
Interim Closing
Interim closing can occur when you purchase a newly constructed condominium. In
this event, the first closing, occurs on the confirmed possession date (also
called the interim closing date) when the unit is ready for occupation. At this
time, the purchaser is required to take possession of the unit, but the
condominium has not yet been registered. After the interim closing, you can live
in the condominium dwelling unit, but you do not yet own it: You occupy the unit
more or less as a tenant. During this time, you will pay a monthly interim
occupancy fee to the developer, for realty taxes, maintenance and interest on
the vendor take-back mortgage. Once the condominium is registered there will be
a final closing. At the final closing, title to the condominium is registered in
the purchaser’s name and, if you are borrowing money to purchase the
condominium, your mortgage is also registered.
M
Management
Company
Larger groups of units usually hire a management company to oversee the
operation of the complex. Management companies are not all the same. Like
everything else, some are more expensive than others. Some are better than
others. Most management companies are members of the CT chapter of the Community
Associations Institute. For a list go to
CAICT.org.
Management Fee
The Management fee is the cost of professional services paid to the management
company to oversee the affairs of the cooperative or condominium complex. The
fee usually covers personnel and includes services such as bookkeeping,
reporting, and records. However, the management company may also be paid to
perform other services. When comparing management fees, you need to know what
services are being performed.
N
Newly Constructed Condominium
A brand-new, modern building(s). Brand new condominiums are often covered by a
New Home Warranty Program. If you purchase a new condominium, you may be allowed
to customize your unit. If you purchase a unit from a plan, you should be aware
that the plans may not reflect the actual floor area of the unit: The plan may
not include the walls of the unit, where things such as the hot water heater,
furnace and/or air conditioning unit could be situated or how low the ceiling
will be to accommodate wires, pipes and ducts. A Conversion Condominium is
similar to a newly constructed condominium, but the exterior of the building
already exists. The developer modifies the building to create individual units
and common elements. New Condominiums may require an
interim closing. Resale Condominiums do not.
Common interest communities that contain no more than 12 units do not need a
public offering statement.
P
Phasing
Plans for building new common elements, units or even entire new buildings
on the same site. Phasing can affect your overall enjoyment of the property
and/or result in delays in access to advertised amenities. It is important to be
aware of other possible implications of phasing.
R
Resale Package
(aka Condominium Documents)
A unit owner must provide the buyer with condominium documents. These documents
must include the declaration,
By-laws and Rules & Regulations of the condominium association and a
resale certificate. Buyers have 5 business days after delivery (7 days after
being sent by registered or certified mail) of this package from the seller to
legally rescind the purchase offer (15 days for new complexes). The resale
package must be furnished to the purchaser or her/her attorney. It is very
important to review these documents carefully. If an assessment or an increase
in common charges is being contemplated, it will be in the Association’s minutes
which you should ask for if not included.
Note: In January of each year the Association must file with the town clerk the
name and address of the officer or managing agent from whom the resale package
may be requested.
Resale
Certificate
CT law requires an owner to provide a
purchaser with a resale certificate as part of the condominium documents. (There
is an exception for communities that contain no more than 12 units and can not
be further developed.) The association must provide a unit owner with a "Resale
Certificate" within ten days of a written request.
The standard resale certificate should include:
- whether the association intends to exercise
any right of first refusal and whether there are any other restrictions on the
sale of the unit.
- common charges and any unpaid common
charges or assessments currently due by the unit owner.
- any capital expenditures greater than
$1,000 which have been approved for the current or next fiscal year.
- the reserve fund.
- current operating budget.
- any unsatisfied judgments against the
association and any pending suits against the association.
- amount and type of insurance coverage
provided by the association.
- for cooperatives, an accountants statement
regarding the deductibility of real property taxes.
- any restrictions on the owner’s right to
use or rent the unit.
The association can charge a fee up to $75 for
compilation and printing.
Resale
Condominium
An existing condominium. If you purchase a resale condominium unit, you will
buy it from an existing owner, not the developer.
Reserve Fund
It is prudent that an Association collect money in the common charges in
excess of the operating expenses. The excess cash is accumulated in a reserved
fund for capital improvements and contingencies. A large reserve fund is a hedge
against having to ask for a special assessment. if you are buying into a new
complex, there will not be much of a need for a large reserve as major items
will not likely need to be replaced soon, however, there should be money coming
from the general budget into the reserves to build up a reserve. In older
complexes, the reserve should be larger.
T
Townhouse
The word "Townhouse" is used loosely for many things. Generally, a townhouse is
a single unit that is detached or semi-attached to the other unit(s) in the
condominium complex. The name "townhouse" is also used to describe non-uniform
units that are designed to mimic detached or semi-detached homes.
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