Condominiums and Planned Unit Developments (PUDs) are both Common Interest Developments, which refer to types of land ownership. These forms of ownership share certain characteristics:
- Common ownership of private residential property; for example, building structures, landscaping, and recreational facilities.
- Mandatory membership of all owners in a homeowners’ association (HOA) which controls use of the common property.
- Governing documents (CCRs and By-Laws) which establish the procedures for governing the association, the rules which the owners must follow in the use of their individual lots or units and of the common properties.
- Assessment of owners to finance the operation of the association and maintenance of common properties.
A PUD community may contain single-family homes, townhomes, and condos, and commercial units.
What Makes Condos and PUDs Different
Here are the important properties of condos and PUDs:
- Ownership of the interior of the unit plus a shared interest in the building, land, and all common areas.
- Maintenance of the shared property is provided by the HOA and paid for by fees collected from all condo owners. Exact maintenance responsibilities are defined in the HOA documents, Covenants, Codes, and Restrictions (CC&Rs).
- Owners have the use of common areas.
- Ownership of 100% of the unit, inside and outside, plus the lot underneath.
- Maintenance of shared property (for example, landscaping outside of individual lots, roads, and recreational facilities) is provided by the HOA and paid for by fees collected from all PUD owners. Exact maintenance responsibilities are defined in the HOA document, Covenants, Codes, and Restrictions (CC&Rs).
- Owners have the use of common areas.
Differences in Everyday Living
In practice, living in either a condo or PUD might not be much different. The major differences may be in how maintenance responsibilities are allocated to individual homeowners versus those provided by the HOA. These responsibilities should be defined in the CC&Rs for each HOA.
Differences in the Purchasing Process
- Interest Rates. Condo financing may come with higher interest rates. PUD interest rates are typically the same as single-family home interest rates.
- FHA Financing. Condos are ineligible for Federal Housing Association (FHA) and Veterans Affairs (VA) financing unless the entire complex is approved. You can look up the approval status of each condo association in this site provided by the US Department of Housing and Urban Development. PUDs are always eligible for both FHA and VA financing.
- HOA Certifications/Rules. With condos, lenders need an HOA certification form and may consider the restrictions that come with condo financing, such as owner-occupancy ratios, HOA litigation, concentration rules (e.g., prohibiting one owner from owning over 20% of the units), commercial use, etc.A detached home in a PUD is normally treated like a single-family dwelling with none of the restrictions that come with condo financing. If the home is attached, limited documentation may be required, but much less than for a condominium purchase.
Before You Buy a Condo or PUD
- Determine whether the property is a PUD or a condo. Listings for a typical home or townhouse can describe the property as a “condominium,” when it is really a PUD. Appraisers also may not have accurate information. Appraisers use different forms for condo appraisals versus PUD appraisals and an appraisal is worthless if the wrong form is used. The CC&Rs and By-Laws for the association are the definitive source of this information. An experienced real estate agent will have these documents and can confirm the property’s class.
- If you’re thinking of buying a property in a PUD or condo association, be sure to factor in the cost of monthly HOA dues, which can be high in some communities. If you find a property with low HOA dues, find out what maintenance and services the HOA provides. Paying less usually means less is provided.
- Familiarize yourself with the HOA’s rules and regulations so you know exactly what you can and can’t do with your property.
- Speak with Madeline Schaider about the extra steps you should take before you buy and what it might mean for your home value down the road.