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What is a Condominium?
A condominium is a form of property ownership where buyers own their units in
fee simple and share in the ownership of certain common property (such as
roads, pools, landscaping, etc) referred to as "common elements." All different
types of housing, including townhouses, mid-rise buildings, and even
single-family detached housing can be developed and sold as condominiums.
which submits the property to the condominium form of ownership.
which submits the property to the condominium form of ownership.
How is a condominium unit defined?
building in which the unit is located, this means that the exterior walls of the
building in which the unit is located, this means that the exterior walls of the
building are a part of the condominium unit. To the extent that the unit
boundaries are defined through the use of the phrase "walls, floors, and
ceilings," this is a legal term of art which incorporates a more specific definition
set forth in the Georgia Condominium Act.
set forth in the Georgia Condominium Act.
What are common elements?
Under the Georgia Condominium Act, all of the property which is not part of a
unit is part of the common elements. The common elements in a typical
residential condominium include the building exteriors, the grounds, and any
recreational facilities. The common elements are normally managed and
operated by the condominium association. However, the unit owners, rather
than the condominium association, usually own the common elements. Each
unit's ownership share of the common elements is spelled out in the
declaration of condominium.
What are limited common elements?
Limited common elements are a part of the common elements that are
assigned to and reserved for the exclusive use of one or more units. Limited
common elements often include such items as decks, patios, parking spaces,
and air conditioning units that are physically located outside of the cube of
space comprising the condominium unit. Limited common elements cannot be
reassigned by the association without the unit owner's written consent. So, for
example, if a parking space is assigned to a unit, it cannot be reassigned or
given to another unit without the consent of the unit owner. Limited common
elements travel with the unit. There is no need to prepare a separate deed for
the transfer of limited common elements when a unit is sold.
What is the buyer obligated to maintain and insure?
Generally, a unit owner has the responsibility to maintain the unit and the
limited common elements. This is not always the case, however. Ownership
and maintenance do not have to follow one another in a condominium and can
be separately assigned in the legal documents. So, for example, the roof or
building exterior can be the maintenance responsibility of the condominium
association yet owned by the buyer. Similarly, a balcony assigned as a limited
common element can be the maintenance responsibility of the owner of the
unit it serves yet owned by all of the Unit owners (since it is a part of the
common elements). Therefore, when reviewing the legal documents for a
condominium, it is important to determine both who owns and who maintains
the different parts of the condominium.
Insurance in a condominium works as follows. The condominium association is
required under the Georgia Condominium Act to obtain a casualty insurance
policy for the full replacement value of all of the structures in the community.
So, for example, if a condominium unit is destroyed by fire, a properly written
condominium association insurance policy should normally cover the loss. Unit
owners usually obtain what is known as an HO6 insurance policy covering their
personal property and any improvements and betterments made to their units.
What power does a condominium association have?
A condominium association is like a mini-government for the condominium. It
operates through an elected board of directors whose role is similar to that of
a town council. The association is responsible for enforcing the covenants or
private laws of the condominium contained in the declaration of condominium
and the bylaws of the condominium association. To carry out its duties,
condominium associations generally have a variety of powers, including (a)
the power to tax unit owners in the form of annual and special assessments;
(b) the power to adopt reasonable rules and regulations regarding use of the
units and common elements; (c) the power to fine owners for violation of the
covenants or rules or regulations of the association; (d) the power to institute
legal action to enforce the obligations set forth in the legal documents; and (e)
the power to approve changes or alterations to the exterior of units or to the
common elements. Each unit is assigned a vote in the condominium
association, which may be equal or weighted. The concept of "one person,
one vote" is not required in a condominium.
What are a buyer's financial obligations?
Each unit owner is obligated to support the condominium association
financially through assessments against the unit. Each owner's share of
expenses of the association is set forth in the declaration of condominium.
There is no statutory requirement that all owners be assessed equally and it is
not unusual for the declaration of condominium to require owners of larger
units to pay higher assessments than owners of smaller units. Once the
expense allocations for each unit are set out in the declaration, they cannot be
changed except with the unanimous consent of the unit owners.
Most condominium legal documents provide that the board of directors sets
the annual assessment subject to a veto right by the membership. While this is
obviously a system with some degree of checks and balances, there is not
statutory requirement that the annual assessment be adopted in this manner.
In some communities, the board of directors has total authority to set the
annual assessment. If the assessment is inadequate, most legal documents
include a procedure by which the association can specially assess the owners
for the deficiency. Buyers should always inquire whether the condominium
association has sufficient monies set aside in a reserve account since this is
usually the best way to prevent a special assessment.
Are the restrictions in the declaration of condominium enforceable?
Georgia courts have shown a great willingness to enforce the regulations in a
declaration of condominium, even when such regulations are added to the
declaration later by amendment. Buyers should review the declaration
carefully to make sure that they can live with whatever regulations exist on
such things as parking, pets, leasing of units, business use of units, and
architectural control. Most condominium owners see the regulation in a
declaration of condominium as protections rather than restrictions. However,
an owner's perspective may vary depending on whether the regulations are
being enforced against the owner's neighbor (in which case they are usually
seen as protections) or against the owner (in which case they are, not
surprisingly, sometimes seen as restrictions).
A condominium association also has strong powers to collect condominium
assessments. Assessments cannot be withheld even if the owner believes the
association is not performing its duties. Failing to pay assessments typically
results in the imposition of an automatic lien against the condominium unit.
The lien also normally includes a late fee for each assessment installment,
interest, and the cost of collection (including reasonable attorneys' fees
actually incurred).
How long does the developer control the association?
The condominium association is created with the initial recording of the
declaration of condominium. While the units are being sold, the developer (or
declarant) has the right to appoint and remove directors of the association
and, therefore, has the power to control its affairs. Under the Georgia
Condominium Act, the period of developer control lasts until 80% of the
ownership interests in the common elements have been transferred to unit
purchasers or three years from the date the declaration was recorded,
whichever occurs first. However, if the legal documents allow the condominium
to be expanded to include an additional phase, the developer can control the
association for up to seven years. Upon control passing from the developer to
the unit owners, a "turnover" meeting is called, and the owners elect their own
representatives to the board of directors to operate the community.
Why are condominium contracts different from other real estate
contracts?
The Georgia Condominium Act requires certain disclosures and warnings in all
contracts for the initial sale of a condominium unit. The contract must state,
among other things, whether the condominium is a conversion, is expandable,
is subject to a lease, or is subject to a lien for rent of a recreational facility.
Additionally, the contract must state that oral or verbal statements of the seller
cannot be relied on by the buyer. Not only must the written disclosures be
made verbatim as set forth in the Georgia Condominium Act, there are also
rules regarding the size and boldness of the type.
Can buyers rescind their condominium purchase contracts?
The only statute giving buyers a right to rescind a real estate sales contract in
Georgia is our condominium act. Specifically, the first buyer of a condominium
unit may rescind his or her contract for seven days. The rescission rights do
not apply to condominium resales.
The seven-day rescission period begins to run from the date the buyer
receives from the developer a mandatory disclosure package (which must
meet certain requirements set forth in the Georgia Condominium Act). Often,
the disclosure package is received with a purchase and sale agreement.
However, if a buyer, for example, signs a contract in May and does not receive
the full disclosure package until a few days before closing in July, the buyer's
seven-day right of rescission begins in July upon the receipt of the package.
What must be included in a disclosure package?
The disclosure package, which must be provided to the initial buyer of the unit,
includes copies of documents such as the declaration, bylaws of the
association, articles of incorporation of the association, a copy of all
association contracts having a term in excess of one year, a statement of the
declarant's commitment to build and submit additional units and recreational
facilities, and the estimated or actual operating budget for the condo
association. Buyers should be required to sign a written acknowledgment that
they have received the entire disclosure statement to eliminate any disputes
regarding when the rescission period begins to run.
Questions to Consider When Buying a Condominium:
§ If the condominium unit is being sold for the first time, have all
developer/listing broker promises been incorporated into the contract,
including promises regarding completion of recreational amenities?
§ Have I reviewed any warranty which might be given on the condominium unit?
§ Do I know the boundaries of the condominium unit?
§ Do I know what limited common elements, if any (i.e., decks, balconies,
stoops, storage lockers, parking spaces), are assigned to the condominium?
§ Do I know whether any architectural changes were made to the unit which
the unit owner is responsible to maintain?
§ Do I know whether the condominium association or the unit owners pay for
utilities serving the condominium unit?
§ Have I inspected the common elements as well as the condominium unit?
§ How long will any period of developer ("declarant") control last?
§ Can the developer include additional phases in the condominium?
§ Have I determined the monthly condominium assessment?
§ Have I inquired of the condominium association whether there are any
pending special assessments?
§ Have I inquired whether there are any outstanding violations of the
declaration of condominium?
§ Have I determined the amount of money the condominium association has in
capital reserves?
§ Have I inquired generally regarding the percentage of leased units?
§ Have I inquired generally about the dollar amount of unpaid condominium
assessments in the condominium?
§ Have I reviewed the declaration of condominium?
§ Am I comfortable with the use restrictions in the declaration (i.e., restrictions
on parking, pets, businesses, and leasing)?
§ Do I know how annual and special assessments are determined?
§ Can the declaration be amended to meet changing conditions?
Must condominium managers be licensed real estate agents?
In January 1997, a new law went into effect requiring condominium managers
to be licensed by the Georgia Real Estate Commission. Interestingly, the law
created a new license category for "community association managers" or
"CAM's." In order to obtain a CAM license, the manager has to meet certain
requirements similar to those which exist for licensed salespersons, but with a
greater concentration on condominium and homeowner association issues. As
with all real estate brokerage, the license of a CAM must be held by a real
estate broker who supervises the manager's activities. Real estate sales
agents with sales licenses are also allowed to be community association
managers. However, managers with just a community association manager's
license are not allowed to sell or lease property.
Among the more notable exemptions to the new law is for managers who are
employed by only one on a full-time basis. In other words, a community
association can still go out and hire an unlicensed manager to work directly for
the association. The exemption does not apply, however, to management
companies that place a manager on-site at a particular community, where the
manager is employed by the management company.
By Seth Weissman
A condominium is a form of property ownership where buyers own their units in
fee simple and share in the ownership of certain common property (such as
roads, pools, landscaping, etc) referred to as "common elements." All different
types of housing, including townhouses, mid-rise buildings, and even
single-family detached housing can be developed and sold as condominiums.
which submits the property to the condominium form of ownership.
which submits the property to the condominium form of ownership.
How is a condominium unit defined?
building in which the unit is located, this means that the exterior walls of the
building in which the unit is located, this means that the exterior walls of the
building are a part of the condominium unit. To the extent that the unit
boundaries are defined through the use of the phrase "walls, floors, and
ceilings," this is a legal term of art which incorporates a more specific definition
set forth in the Georgia Condominium Act.
set forth in the Georgia Condominium Act.
What are common elements?
Under the Georgia Condominium Act, all of the property which is not part of a
unit is part of the common elements. The common elements in a typical
residential condominium include the building exteriors, the grounds, and any
recreational facilities. The common elements are normally managed and
operated by the condominium association. However, the unit owners, rather
than the condominium association, usually own the common elements. Each
unit's ownership share of the common elements is spelled out in the
declaration of condominium.
What are limited common elements?
Limited common elements are a part of the common elements that are
assigned to and reserved for the exclusive use of one or more units. Limited
common elements often include such items as decks, patios, parking spaces,
and air conditioning units that are physically located outside of the cube of
space comprising the condominium unit. Limited common elements cannot be
reassigned by the association without the unit owner's written consent. So, for
example, if a parking space is assigned to a unit, it cannot be reassigned or
given to another unit without the consent of the unit owner. Limited common
elements travel with the unit. There is no need to prepare a separate deed for
the transfer of limited common elements when a unit is sold.
What is the buyer obligated to maintain and insure?
Generally, a unit owner has the responsibility to maintain the unit and the
limited common elements. This is not always the case, however. Ownership
and maintenance do not have to follow one another in a condominium and can
be separately assigned in the legal documents. So, for example, the roof or
building exterior can be the maintenance responsibility of the condominium
association yet owned by the buyer. Similarly, a balcony assigned as a limited
common element can be the maintenance responsibility of the owner of the
unit it serves yet owned by all of the Unit owners (since it is a part of the
common elements). Therefore, when reviewing the legal documents for a
condominium, it is important to determine both who owns and who maintains
the different parts of the condominium.
Insurance in a condominium works as follows. The condominium association is
required under the Georgia Condominium Act to obtain a casualty insurance
policy for the full replacement value of all of the structures in the community.
So, for example, if a condominium unit is destroyed by fire, a properly written
condominium association insurance policy should normally cover the loss. Unit
owners usually obtain what is known as an HO6 insurance policy covering their
personal property and any improvements and betterments made to their units.
What power does a condominium association have?
A condominium association is like a mini-government for the condominium. It
operates through an elected board of directors whose role is similar to that of
a town council. The association is responsible for enforcing the covenants or
private laws of the condominium contained in the declaration of condominium
and the bylaws of the condominium association. To carry out its duties,
condominium associations generally have a variety of powers, including (a)
the power to tax unit owners in the form of annual and special assessments;
(b) the power to adopt reasonable rules and regulations regarding use of the
units and common elements; (c) the power to fine owners for violation of the
covenants or rules or regulations of the association; (d) the power to institute
legal action to enforce the obligations set forth in the legal documents; and (e)
the power to approve changes or alterations to the exterior of units or to the
common elements. Each unit is assigned a vote in the condominium
association, which may be equal or weighted. The concept of "one person,
one vote" is not required in a condominium.
What are a buyer's financial obligations?
Each unit owner is obligated to support the condominium association
financially through assessments against the unit. Each owner's share of
expenses of the association is set forth in the declaration of condominium.
There is no statutory requirement that all owners be assessed equally and it is
not unusual for the declaration of condominium to require owners of larger
units to pay higher assessments than owners of smaller units. Once the
expense allocations for each unit are set out in the declaration, they cannot be
changed except with the unanimous consent of the unit owners.
Most condominium legal documents provide that the board of directors sets
the annual assessment subject to a veto right by the membership. While this is
obviously a system with some degree of checks and balances, there is not
statutory requirement that the annual assessment be adopted in this manner.
In some communities, the board of directors has total authority to set the
annual assessment. If the assessment is inadequate, most legal documents
include a procedure by which the association can specially assess the owners
for the deficiency. Buyers should always inquire whether the condominium
association has sufficient monies set aside in a reserve account since this is
usually the best way to prevent a special assessment.
Are the restrictions in the declaration of condominium enforceable?
Georgia courts have shown a great willingness to enforce the regulations in a
declaration of condominium, even when such regulations are added to the
declaration later by amendment. Buyers should review the declaration
carefully to make sure that they can live with whatever regulations exist on
such things as parking, pets, leasing of units, business use of units, and
architectural control. Most condominium owners see the regulation in a
declaration of condominium as protections rather than restrictions. However,
an owner's perspective may vary depending on whether the regulations are
being enforced against the owner's neighbor (in which case they are usually
seen as protections) or against the owner (in which case they are, not
surprisingly, sometimes seen as restrictions).
A condominium association also has strong powers to collect condominium
assessments. Assessments cannot be withheld even if the owner believes the
association is not performing its duties. Failing to pay assessments typically
results in the imposition of an automatic lien against the condominium unit.
The lien also normally includes a late fee for each assessment installment,
interest, and the cost of collection (including reasonable attorneys' fees
actually incurred).
How long does the developer control the association?
The condominium association is created with the initial recording of the
declaration of condominium. While the units are being sold, the developer (or
declarant) has the right to appoint and remove directors of the association
and, therefore, has the power to control its affairs. Under the Georgia
Condominium Act, the period of developer control lasts until 80% of the
ownership interests in the common elements have been transferred to unit
purchasers or three years from the date the declaration was recorded,
whichever occurs first. However, if the legal documents allow the condominium
to be expanded to include an additional phase, the developer can control the
association for up to seven years. Upon control passing from the developer to
the unit owners, a "turnover" meeting is called, and the owners elect their own
representatives to the board of directors to operate the community.
Why are condominium contracts different from other real estate
contracts?
The Georgia Condominium Act requires certain disclosures and warnings in all
contracts for the initial sale of a condominium unit. The contract must state,
among other things, whether the condominium is a conversion, is expandable,
is subject to a lease, or is subject to a lien for rent of a recreational facility.
Additionally, the contract must state that oral or verbal statements of the seller
cannot be relied on by the buyer. Not only must the written disclosures be
made verbatim as set forth in the Georgia Condominium Act, there are also
rules regarding the size and boldness of the type.
Can buyers rescind their condominium purchase contracts?
The only statute giving buyers a right to rescind a real estate sales contract in
Georgia is our condominium act. Specifically, the first buyer of a condominium
unit may rescind his or her contract for seven days. The rescission rights do
not apply to condominium resales.
The seven-day rescission period begins to run from the date the buyer
receives from the developer a mandatory disclosure package (which must
meet certain requirements set forth in the Georgia Condominium Act). Often,
the disclosure package is received with a purchase and sale agreement.
However, if a buyer, for example, signs a contract in May and does not receive
the full disclosure package until a few days before closing in July, the buyer's
seven-day right of rescission begins in July upon the receipt of the package.
What must be included in a disclosure package?
The disclosure package, which must be provided to the initial buyer of the unit,
includes copies of documents such as the declaration, bylaws of the
association, articles of incorporation of the association, a copy of all
association contracts having a term in excess of one year, a statement of the
declarant's commitment to build and submit additional units and recreational
facilities, and the estimated or actual operating budget for the condo
association. Buyers should be required to sign a written acknowledgment that
they have received the entire disclosure statement to eliminate any disputes
regarding when the rescission period begins to run.
Questions to Consider When Buying a Condominium:
§ If the condominium unit is being sold for the first time, have all
developer/listing broker promises been incorporated into the contract,
including promises regarding completion of recreational amenities?
§ Have I reviewed any warranty which might be given on the condominium unit?
§ Do I know the boundaries of the condominium unit?
§ Do I know what limited common elements, if any (i.e., decks, balconies,
stoops, storage lockers, parking spaces), are assigned to the condominium?
§ Do I know whether any architectural changes were made to the unit which
the unit owner is responsible to maintain?
§ Do I know whether the condominium association or the unit owners pay for
utilities serving the condominium unit?
§ Have I inspected the common elements as well as the condominium unit?
§ How long will any period of developer ("declarant") control last?
§ Can the developer include additional phases in the condominium?
§ Have I determined the monthly condominium assessment?
§ Have I inquired of the condominium association whether there are any
pending special assessments?
§ Have I inquired whether there are any outstanding violations of the
declaration of condominium?
§ Have I determined the amount of money the condominium association has in
capital reserves?
§ Have I inquired generally regarding the percentage of leased units?
§ Have I inquired generally about the dollar amount of unpaid condominium
assessments in the condominium?
§ Have I reviewed the declaration of condominium?
§ Am I comfortable with the use restrictions in the declaration (i.e., restrictions
on parking, pets, businesses, and leasing)?
§ Do I know how annual and special assessments are determined?
§ Can the declaration be amended to meet changing conditions?
Must condominium managers be licensed real estate agents?
In January 1997, a new law went into effect requiring condominium managers
to be licensed by the Georgia Real Estate Commission. Interestingly, the law
created a new license category for "community association managers" or
"CAM's." In order to obtain a CAM license, the manager has to meet certain
requirements similar to those which exist for licensed salespersons, but with a
greater concentration on condominium and homeowner association issues. As
with all real estate brokerage, the license of a CAM must be held by a real
estate broker who supervises the manager's activities. Real estate sales
agents with sales licenses are also allowed to be community association
managers. However, managers with just a community association manager's
license are not allowed to sell or lease property.
Among the more notable exemptions to the new law is for managers who are
employed by only one on a full-time basis. In other words, a community
association can still go out and hire an unlicensed manager to work directly for
the association. The exemption does not apply, however, to management
companies that place a manager on-site at a particular community, where the
manager is employed by the management company.
By Seth Weissman
| Condominiums 101 The Basics |
