By some estimates, one third of all California homes are in some kind of common interest development, a number that is growing.
California law lists four types of common interest developments in Civil Code Section 4100: community apartment, stock cooperative, condominium and planned development. The real estate interest owned is completely different in each, and so involves different considerations for homeowners.
To determine what kind of CID (aka “HOA”) is yours, don’t make assumptions based on the configuration of the buildings. Instead, look closely at the CC&Rs, because Civil Code 4250 requires that any CC&R’s recorded in 1986 or later identify which kind of CID a project is.
Defined by Civil Code 4105, and also often known as the “own-your-own,” the community apartment is the simplest form of HOA.
In a community apartment, each owner receives a deed not for a given residence, but a deed for an equal shared “tenant in common” ownership of the entire property.
The owner receives an easement or license with that deed, specifying the dwelling in which that owner will occupy. Community apartments are normally older and unincorporated associations.
Stock cooperative: Often referred to in short as a “co-op,” and defined by Civil Code Section 4190, the stock cooperative is a corporation in which the HOA owns the entire property. Instead of a deed, each member receives a share of stock in the corporation coupled with the right to occupy a given residence. Co-ops are less common normally older HOAs.
Condominium: Per Civil Code 4125, a condominium project is a property split into two conceptual parts. There are the residences, called “units”, which the law refers to as the “separate interests.” The “common area” is everything else.
Condominiums are not always attached housing: Condominiums are occasionally detached housing if the developer sets it up that way, so always check the deed and CC&Rs to be sure. The Condominium Plan defines what is the “unit” or “separate interest” and what is shared “common area” (Civil Code 4095).
Planned development: If a project is not a condominium, stock cooperative, or community apartment, and has a common area and the power to assess members, it is a “planned development” (Civil Code Section 4175). “Planned Unit Development” is a common but incorrect and misleading term, since “unit” is a condominium term.
When one thinks of planned developments, normally detached homes come to mind, but townhome or patio home projects can also be planned developments, so don’t be fooled by the project’s appearance.
What do the CC&Rs and grant deed say? The real property interest in a planned development is called a “lot”. [If doubt persists, check with legal counsel].
It’s not just a label: The type of HOA project involves more than just the technical label of the type of property purchased. Condominium, co-op, and community apartment associations normally have greater maintenance and repair responsibilities than planned developments, which usually leave most maintenance and repairs to members.
Community apartments and stock cooperatives are far less common and typically older, and financing options for those homes are very limited. This affects their desirability and value, so most community apartments and stock cooperatives will most likely eventually pursue the conversion process to become condominiums.
Know what you have – it’s important.
Kelly G. Richardson CCAL is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober LLP, a California law firm known for community association advice. Send column questions to Kelly@roattorneys.com.
