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The Three Types of Community Associations

There are three different kinds of community associations. Here we'll discuss the differences between them and the benefits each has to offer.
Staff Writer | Mar 28, 2024 | 3 min read
The Three Types of Community Associations

Three kinds of community associations exist, and it is important to know the differences between them when buying a home.  Each one has to do with a particular type of property ownership.  The United States has more than 350,000 community associations. This means that 40 million American households live within a community association.

Homeowner Association (HOA)

These associations are legal entities established to govern a common interest community.  This community is a planned development with individual lots. Each lot has a stand alone, single family home on it. The homeowner owns the building, the land underneath it and some land around it (the yard). 

The community developer usually establishes the HOA, either as a non-profit corporation or as a for-profit corporation, before he sells any homes. Once he has sold most of the houses, he then transfers the HOA to the homeowners.

A volunteer board of directors, all homeowners, takes on the HOA management responsibilities and is often assisted by a professional property management company. Board responsibilities include maintaining community amenities and common areas (sidewalks, green spaces, parking areas, etc.) and determining homeowner fees which usually cover snow removal and trash removal. Items such as exterior building insurance and maintenance are not covered by HOA fees.

The board also enforces community rules and regulations. These rules are known as the Declaration of Covenants, Conditions and Restrictions (CC&Rs), and every homeowner who buys a house in an HOA must follow them.

Condominium Association

A condominium is an individually owned residence in a building with multiple units. Similar to an apartment building, a condominium can have neighbor units above, below and on either side. The common condominium elements or areas are jointly owned by the residents. A condominium community has several buildings within it.

A condominium association is a group of unit owners set up to govern the common building(s). Similar to planned communities, all condominium owners are members of the association and must follow its rules and regulations.

And like a planned development's HOA, the association elects a board of directors. This board is responsible for common area upkeep, amenities' maintenance, rules enforcement and determining homeowners' dues.

These dues cover the general upkeep of the community, and each unit owner's percentage of ownership interest determines his dues amount. So generally the larger the unit someone owns, the higher his dues are.  Condo dues usually include maintenance and insurance for building exteriors and all common areas as well as sewer service, trash removal, snow removal and more. 

The community association board also settles homeowner disputes. These can include anything from noise complaints to parking issues.  It is within the association's authority to send warning letters and issue fines.

Cooperative Association

A cooperative or co-op is a legal entity, usually a corporation, that owns a building. Owners within a co-op do not own the unit they live in.  Instead they own shares in the corporation and have proprietary rights to occupy a specific unit in the building. The unit's square footage, location in the building and other factors determine each owner's number of shares.

Members of the co-op establish a board of directors to manage the co-op and its amenities.  The corporation's articles of incorporation, bylaws and occupancy agreement outline the co-op's rules.  Since the co-op owns the property, it is responsible for maintaining and repairing it as necessary. This often means hiring employees or outside vendors to do the work, although many co-ops have members who like to do the work themselves.

Co-op owners pay a maintenance fee based on their number of shares in the building. This fee covers three basic expenses, including the operating costs of the building such as heat, water, electricity, insurance and staff salaries. It also covers building property taxes and the building mortgage if one still exists.

Unlike HOA and condominium boards, co-op boards tend to thoroughly vet potential new members.  They do this through personal interviews, background checks, employment checks and financial viability checks. This is because every cooperative shareholder gets a say in choosing his neighbors.

It is important to understand what kind of community association governs the home that you want to buy. Each has its pluses and each is in place to protect both the owners and the overall community.

 

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