PUD vs. HOA

[Paul Ness MAI]

Charlotte, are the common elements owned by the home owners or the HOA? Seems picky but there is a difference. I guess Jo Ann's comment that a PUD is a form of ownership leads me to believe it is something less than fee simple and that the whole bundle of rights are diminished in some way and I was wondering how and what is diminished. Does that make sense?

 

[Jo Ann Meyer Stratton]

There are two types of PUDs or Planned Unit Development. One could be zoning by the local government, that would be government restrictions placed on the ownership. There could also be private restrictions on the ownership that is written into the CC&Rs for the subdivision. Depending on the applicable laws in each state, those restrictions in the CC&R's would create either a PUD or a condo type of ownership. In Arizona, if the an owner has title to a lot in a subdivision, the land within the boundaries of the lot, all improvements to and on the land and the CC&R's for the subdivision also indicate an undivided interest to something outside the boundaries of that lot within the subdivision that requires the home owner to belong to an association and pay a fee for that membership---it is a PUD. In that subdivision, on all appraisal reports for financing the appraiser is to indicate under "Property Rights Appraised" both "fee simple" or "leasehold" and "PUD" and report the monthly HOA fee. If there is no private restrictions in that specific subdivision for a mandatory fee for a mandatory membership to any community amenity, then only the fee simple or leasehold box for property rights appraised would be checked. Further down on the forms under site information, Specific Zoning Classification and description is asked---that could be in some counties or towns PUD for Planned Unit development--a governmental restriction.

Regarding condo--again it appears that states vary in their legal definitions of the difference between condo and PUD. In Arizona both types have undivided interest or a common interest in something outside of the lot or unit boundaries that belongs to the home owner's association. A PUD owns from the center of the earth to outer space the area within their lot boundaries. A condo ownership is only the airspace within the interior of the unit and does not own any land or anything exterior to the unit. A condo ownership is indicated in the CC&Rs in Arizona by the phrase of "horizontal property regime". If that phrase is not in the CC&RS, the subdivision is a PUD, not a condo. When completing an appraisal in an area with a mandatory HOA fee, it is essential for the appraiser to read the CC&R's for the subdivision and your states definitions to determine the appropriate property rights appraised.

 

[Paul Ness MAI]

Jo Ann, thanks, I'm really learning something here. I guess states can create their own definitions apart from what the real estate dictionaries say. Very interesting. When you say the condo ownership includes only the air space, then who owns the common elements? It seems rather inconsistent that a lot owner will own a pro-rata share of common elements of the PUD but a condo owner doesn't. Is it just me or what?

 

[Charlotte Dixon]

When completing an appraisal in an area with a mandatory HOA fee, it is essential for the appraiser to read the CC&R's for the subdivision and your states definitions to determine the appropriate property rights appraised.

Exactly, Jo Ann....The community I described above is proof of the confusion which is occurring.

Paul, the homeowners, not the association, own a portion of the amenities/common elements, such as the clubhouse, pool, tennis, etc. To confuse the situation even more, the development is within the city's jurisdiction and the city is responsible for street maintenance. I neglected to mention, but I'm sure you understood, these doublewides are all on permanent foundations. And, to add a final note....the community keeps me busy doing V.A. repossessions. This community is a pet of mine because I've been working in it since the first unit went in there. An appraisal in that subdivision came across my desk the other day which a (sorry) really stupid appraiser did. She appraised a property in this doublewide/condo community (in the city) and used comps 15 miles away which are on 1 acre lots, not a condo, no homeowners assoc. etc. It made my hair curl! Of course she didn't use comps in there because values are declining.

 

[Jo Ann Meyer Stratton]

Whether it is a PUD or a condo, the home owner's association owns the common areas. Each individusal has an interest in those common areas. They cannot individually do anything with a common area (like plant a tree or build something on it) but must participate in the home owner's association and all owners vote on whether the tree should be planted or not. Both a PUD and a condo association could determine all houses are to be painted pink with green trim. In a PUD association the individual home owner would be responsible for doing the painting within a specific time frame. In a condo the association would employed the painter, buy the paint and then assess each home owner a share of the cost. Both PUD and condos could have a community pool, recreational buildings, walkways, greenbelts, etc and their home owner's association would arrange for maintenance of those common areas and the mandatory fee would be a pro-rata fee toward that maintenance.

I live in a subdivision with a community pool, recreational building and tennis courts. I cannot use or access any of those facilities because I do not belong to the home owner's association. I do not pay a HOA fee, the fee is not mandatory and there fore I am not located in a PUD. The subdivision restrictions however limit homes to being 1,200 square feet or larger, must be constructed of burnt adobe, cannot have any additional living quarters on a lot, etc, etc. It has CC&Rs but does not have any provisions for any home owners association, so again it is not a PUD.

If all this discussion has been confusing--I guess I better not comment on Sun City and Sun City West, which iare master planned communities but not PUDs or condos. Although they have a mandatory recreational users fee based on number of owners and tenants per each lot or unit. They have had underwriters and appraisers arguing and scratching their heads for close to fifty years.

By the way I had always gone by the real estate dictionary explanation until several years ago on the chat rooms when appraisers from other states started explaining their unique situations. So states do vary quite a bit and a lot of governing bodies (and possibly attornies or title companies) have never seen a real estate dictionary. By the way do you have access to the latest Blacks Law Dictionary? I have the 6th Edition and I have wondered if the most recent one has changed definition as the Real Estate Dicitonary has done???

 

[Charlotte Dixon]

Whether it is a PUD or a condo, the home owner's association owns the common areas.

We can't make blanket statements here, Jo Ann, and the real estate dictionary, should be, constantly changing. In the community I speak of, the homeowners own the common elements, i.e. pool area, tennis, clubhouse, etc. Now, deep in the condo docs there are clauses saying they can't plant a tree, build, etc. So, nothing's black and white anymore, we know that.

 

[Paul Ness MAI]

I understand the governance of the common elements and the powers of the condo assn, but I always thought by definition condo ownership universally included a proportionate share of the common elements, including the land, and that control of these elements was imparted to the assn. I guess it's just different from state to state.

 

[Charlotte Dixon]

Yes, Paul, this one I'm beating to death is not the norm!
I quote some of the clauses from the origninal docs..
Whereas, Declarant is the owner in fee simple of a certain tract, piece and parcel of land...
Whereas, Declarant intends to develp a single family manufactured home housing development wherein an whereby homeowners will be afforded the opporutnity of purchasing a lot and a manufactured home permanently affixed thereto in fee simple, and
Whereas, in addition to and contemporaneously with the purchase by each owner of a lot and a manufactured home permanently affixed thereto each owner will purchase a numbered condominuus unit compartment...
Whereas, the condominium unit compartment being purchased is a unit and an improvement and with regard to each condo unit comparment and the common elements appertaining thereto, ...etc.....Declarant will transfer and convey the condominius unit compartments and the common elements appertaining thereto as well as the numbered lots and the manufactured home....

There is a Condo Council, made up homeowners which enforces the rules/regulations, like a PUD. So, It's a PUD (mandatory fee) and a Condo Community, in fee simple interest, a doublewide community, and it's going downhill.

 

[Verne Hebert]

In this area numerous HOA exist and they certainly are not PUD's. They normally exist to collect fees for community water and/or private road maintenance. However there can be other similar maintenance type expenses included. These are mandatory and if one does not pay them the HOA will lien the property. And I suspect they could foreclose through the lien process-but I am not aware of this happening for a couple hundred bucks a year.

When I first moved here from the SF Bay area, these constant UW inquiries about PUD's drove me crazy. I researched every avenue I could find in an attempt to resolve this in my mind.

Definitions were scattered and varied.

I like Paul's comment in the order of: ...originally intended and planned to be a community with common elements and this ongoing fee for amenities to the HOA constitutes a PUD. In clean english this reconciles well in my mind.

 

[Jo Ann Meyer Stratton]

That is why I said in an earlier posting that it is essential for the appraiser to not only review the subdivision documents but to become very informed regarding the laws regarding subdivisions, etc that are applicable in the subject's state, county and city.

And the appraiser needs to be aware of which are govenment restrictions (describe under site on Fannie Maes forms) and private restrictions (describe at the very top of the form). Terms, restrictions, etc could be very similar in both areas of the form. But could have completely different meanings depending on whether they are a private restriction or a public restriction.

Top of form==private restrictions with mandatory fees

Site area of form==government restrictions