What Are the Differences Between HOAs, Condo Associations and Tenants in Common?
You’re planning to purchase a new home, and while browsing online, you’ve noticed many of the listings you’re interested in contain unfamiliar real estate terms. Specifically, you want to learn more about homeowners associations (HOAs), tenants in common and condo associations before moving forward.
This is important because you want to choose a new home where you feel comfortable. The last thing you want is to purchase a property and quickly realize it’s attached to rules or fees you didn’t completely understand.
Broadly defined, a homeowners association manages a planned community, which might include single-family homes, condominiums or townhouses. Basically, a governing body for the group, the HOA enforces set rules and manages certain aspects of the community for a fee.
Increasingly common, nearly 60% of recently built single-family homes — and 80% of houses in new subdivisions — are part of an HOA, according to the 2019 study “The Rise and Effects of Homeowner Associations,” conducted by Wyatt Clark and Matthew Freedman, published in the “Journal of Urban Economics.”
No two HOAs are the same. Some charge an annual fee, while others require owners to pay monthly dues. The average HOA fee is approximately $200-$300 per month, according to Trulia. However, this varies wildly, according to factors such as geographic location and the amenities provided.
Services covered under the HOA vary just as much but often include maintenance of common areas, building upkeep, neighborhood amenities and insurance for shared spaces within the community.
As noted above, being part of an HOA also requires adhering to community rules. This might include ensuring your lawn is always neat and tidy, limiting the number of people who can reside in your home, noise restrictions and parking regulations.
Essentially a different term for an HOA, a condo association is a governing body for housing that is typically attached. Owners purchase their individual units and part of the common areas owned by all residents.
Fees are collected on a monthly, quarterly or annual basis, covering costs shared by all owners. As with HOAs, fees vary greatly according to factors like geographic location and services provided.
Common services provided may include interior and exterior maintenance, shared utilities — i.e., sewer and garbage collection — insurance and community amenities.
Tenants in Common
An entirely different real estate term, tenants in common refers to a situation where at least two independent owners share one property. In this type of setup, each person has equal ownership of all parts of the property.
However, the co-tenants may have different ownership stakes. For example, one person could own 75% of the property, while the other owns just 25%.
This type of arrangement can be created at any time. Owners also have the right to independently sell or borrow against their stakes of the property.
Understanding HOAs vs. Condo Associations
Jason Gelios, a realtor in Southeast Michigan, said services provided tend to differ between condo associations and HOAs.
“Many people who decide to live in a condo association are looking for the convenience of the included tasks which include lawn maintenance, snow removal and upkeep of the exterior,” said Gelios, who is also the author of the book “Think Like a REALTOR®.” “In my local market of Southeast Michigan, I see either younger couples starting out or senior citizens downsizing looking to purchase a condo with an association.”
On the other hand, he said HOAs — i.e., those covering single-family homes — don’t always provide as many services.
“Many newer subdivisions have HOAs as part of their community,” he said. “In a subdivision, an HOA may only cover snow removal and blight laws, but only require an annual fee.”
When searching for homes attached to an HOA or a condo association, it’s important to read the fine print to really understand what the fees cover. You want to make sure you can afford your mortgage, association expenses and other ownership costs not included in the community fee.
For example, you might pay a monthly condo fee of $300 that includes some outdoor maintenance — i.e., lawn care services and gutter cleaning — but still be responsible for the cost of a new roof or painting your home.
This is important to know because you want to go into the situation with a full snapshot of the financial obligations associated with ownership.
HOAs, condo associations and tenants in common each have their advantages and disadvantages, so choose what’s right for your unique situation. Being as informed as possible will allow you to make a decision that best fits your lifestyle.
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