Condos, Co-ops and Puds
11/04
Whether you are a senior looking to downsize, a first time homebuyer or just someone who is interested in the carefree style of living where chores such as shoveling snow, mowing the lawn and weeding are handled by someone else, you should know the differences in the various forms of ownership in community living.
Unlike residential real estate, where the owner owns the land and any structures on his property, incidences of ownership differ in community living depending on the type of property you own.
In Putnam County, the most common type of community living is Condominium ownership. In a Condo, the owner owns that cubicle of space between the four walls of the unit and the ceiling and floor. The remainder of the building and the outside land are considered to be part of the common elements. In Condos, each unit owner owns an undivided interest in the common elements. Condo owners pay their own taxes and also pay a monthly maintenance fee to cover the cost of upkeep on the common areas such as driveways, parking lots, lawns, pools and other items.
A Planned Unit Development (“PUD”) is a form of ownership similar to a Condo except most PUDs are Townhouse style homes which are built on separate lots. In a PUD, the owner owns the land upon which the home sits. Typically a Homeowner’s Association is in charge of maintaining the common elements such as recreational facilities and parking lots. Title to a PUD or Condo is transferred by a Deed which is recorded in the County Clerk’s office.
Cooperative apartment owners are often surprised to learn that they do not own real estate at all. What a Co-op owner owns is shares in a corporation which is considered personal property – not real property. The corporation owns the underlying land and issues proprietary leases to the individual owners to reside in specific apartments. Rather than giving the lender a mortgage which is secured by real property, the Co-op owner obtains a personal loan from the lender which is secured by the stock certificate and proprietary lease issued by the Co-op. A Co-op owner can be considered to own a share of the entire premises with rights to live in a specific apartment. Co-op owners receive similar tax deduction benefits as owners of residential real estate, Condos or PUDs in that they receive a tax deduction for interest on their loan as well as their pro-rata share of real estate taxes paid by the corporation. Co-op owners pay monthly maintenance which covers their pro-rata share of real estate taxes as well as the typical fees for upkeep on the common areas.
Co-ops, Condos and PUDs always have Boards of Directors who are owners elected by the other owners to oversee the management of the premises. In many cases, a Managing Agent is hired to handle the hiring of maintenance crews and staff, maintain payroll records and collect monthly common charges and pay all the bills.
Community living has many advantages as well as disadvantages. For those considering community living you may wish to thoroughly investigate how the Board of Directors in that community handles issues such as parking, capital improvements, groundskeeping, noise complaints and other matters which typically are not a concern to the average homeowner of residential real property.