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Homeowner and Condominium Association Fees - Part 2

Posted by Benjamin Dona on Tuesday, March 18th, 2014 at 5:02pm.

Continuing on from our first post - Homeowner and Condominium Association Fees - Part 1, we are now going to focus the discussion on what to expect when the neighborhood in question is also a condominium association.

Homeowner and Condominium Association Fees - An ExplanationThere are multiple condominium neighborhoods within Pelican Landing and their residents are members of both the master homeowner's association (Pelican Landing) and their individual condominium association. A single condominium owner does not own the land under their building; they own 1/100th (if there are 100 units in the project) of all the land, the buildings, and their condominium associations' amenities. If there are 250 units, then they own 1/250th. This is a very simplistic way of explaining the ownership in a condominium complex, even if it is contained within a master association. They are all the same with, or without, a master association homeowner's association as an umbrella. In a condominium, you own title to the interior of your home, and you do not own the roof individually, nor the pool. Every owner owns an equal and undivided portion of the improvements of their neighborhood. You can’t sell 1/250th portion of the land, it belongs to every owner.

A typical example is Sawgrass Point at Pelican Landing, a condominium association. Again, every residence in Sawgrass pays the $1,600 to the master homeowner's association which is Pelican Landing. And, then pays a quarterly fee to the Sawgrass homeowner's association in the amount of $1,256 per quarter. Their quarterly payment of $1,256 covers maintenance for the buildings, including roof replacements, insurance for the buildings, repair and replacement of the pool and pool house, carports, storage sheds, walkways and stairs to the second floors, BBQs and restrooms at their pool house, landscaping, irrigation, and any landscaping replacements. Literally, everything contained within Sawgrass is covered by the condo association fees they collect. The only items the owners at Sawgrass Point pay for are their real estate taxes, homeowner's insurance for the interiors of their units, and repair and replacement of their outside air handlers, as they are individual to the homeowner. Therefore, a residence in Sawgrass Point pays $6,624 per year, or $552 per month. The fees are higher in a condominium association simply because an individual owner isn't maintaining a roof, carport, or insuring a $2M building as the association is doing that on their behalf.

Condominiums are also homeowner's associations. Any time the "governing documents"  of a neighborhood requires every resident to be a member and pay an assessment, the law in Florida designates that as a homeowner's association. This is where it seems to get confusing for buyers. Every condominium association is a homeowner's association, but not every individual homeowner's association is a condominium association. The major difference between Baycrest and Sawgrass is quite simple – the residents of Baycrest own their individual lots and the residents of Sawgrass share an ownership interest in all of the land in the complex. So, Baycrest is only a homeowner's association and cannot be a condominium association. But, Sawgrass is a homeowner's association that is designated as a condominium association. The terms condominium association and homeowner's association are used interchangeably all the time in this area. However, they are both homeowners' associations.

Now that we're sure we have you totally confused, let's look at how the state of Florida views these different types of community associations and the laws they put in place to try to protect buyers prior to the signing of a purchase contract. If your eyes were glazing over from reading what's above, just wait until you continue reading below.

When you purchase a home or a condominium in Florida, there are two state laws protecting your rights when membership is required in an association, or associations. FS 718 and FS 720 are the Florida Statutes for Condominium Associations and Homeowner's Associations, respectively. Condominium associations have more restrictions as to how they must be operated for compliance with the law. As an example, if you buy a new construction condominium the builder or developer must give you the governing documents, including the budget. You have 14 days for review and may cancel your contract if you find this is not the complex you want. On re-sale condominiums, you are entitled to all of the same documents, but you have only three days to review. In both cases, you must cancel in writing within the pertinent time frame. And remember, the clock does not start ticking on the two time frames until you have "actually received" the governing documents.

Homeowner's associations are granted more latitude in how they conduct operations; and there is no requirement to give you any documents, nor any time period for you to cancel, unless you did not receive the proper homeowner's association disclosure prior to executing your purchase contract. This is where we start getting into difficulty with buyers. So, let's address how to prevent getting caught "holding the bag,"  as they say.

Florida law states "all buyers must receive the notice required by Florida Statute 720.401 before executing a contract for sale when membership and fees are required by a homeowner's association."  If you do not receive this disclosure before you sign, then you have a voidable contract by giving written notice to the seller or seller's agent or representative within three days after receipt of the disclosure, or prior to closing, whichever occurs first. Additionally, you cannot "waive"  the right to void the contract and the "right"  only disappears at closing. Sounds complicated, but it is not.

The disclosure required by 720.401 is the notice telling you that you are joining a mandatory homeowner's association, there are restrictive documents governing the use and occupancy of the property, you will be obligated to pay assessments (fees), the amount of the fees, and/or any special assessments and they are subject to change, failure to pay may result in a lien against your property, an obligation to pay rent or land use fees for use of recreational facilities, the developer may amend the documents, the statements in the disclosure are summary only in nature, you should obtain the documents, and you may obtain them from either the public records or from the developer. This disclosure is not the condominium association disclosure, it is the state requirement for all properties that require you to join a homeowner's association whether a house, villa, or condominium. Important Note: Remember, if you do not receive this disclosure; then you may void your contract until you receive it and up to three days afterwards, if it was not given to you at the time you signed your purchase contract. You also can void the contract all the way up to the day of closing, if you never received the disclosure at all.

Further, if you buy any property requiring membership in an association, you should receive a disclosure for each association where membership is required. This is not hard to understand using the two examples above for Pelican Landing. If you buy in Baycrest at Pelican Landing, you should receive two homeowners' association disclosures. One should be for Pelican Landing, and one for Baycrest. That's what the law requires.However, if you purchase in Sawgrass Point, you should also receive two homeowners’ association disclosures one for Pelican Landing and one for Sawgrass. Where agents frequently confuse the issue for the buyer is by giving you a condominium rider as opposed to the homeowner’s disclosure for Sawgrass. The homeowner's association disclosures contain completely different verbiage and you need to be aware that if you do not receive these disclosures for every required membership prior to executing your purchase contract, then you may void the contract, as explained above.

The condominium rider explains how you receive documents, who pays for them (seller), when your right to expire for review and cancelation occurs, and if there are any special assessments and how they will be paid, if you have to apply for approval, etc. There are other items on the condominium rider, but these cover most of them. This form is not meant to take the place of the homeowner’s association disclosure.

Although many agents try to combine associations on one form and substitute the use of the condominium rider over the homeowner’s association disclosure, real estate attorneys in our area have recommended to us that agents give one for each association, and you receive one for each circumstance. That is the proper method of informing you, as a buyer, which associations you must join, how much it will cost, and whether or not you should pursue obtaining the governing documents. Each and every PUD (planned urban development) is different, provides different amenities and services, requires different memberships, and you should not take them for granted via just a disclosure, even if you receive every one of those required disclosures. You need knowledge about what you actually own, how you can use it, what will it cost, and if you want to live there.

The problem lies with getting "some"  agents to follow the statutes and provide all the disclosures. Many just "cop the attitude"  that they don't care whether the contract is voidable or "it is just too much trouble to get our seller to sign all of these types of things."  It's a load of BS and should not be tolerated within our industry. Unfortunately without an enforcement mechanism with teeth in place at this time, we are left to deal with their inane excuses and leave "all the interested parties" to a purchase contact in limbo in many cases.

All we can do is strongly recommend that you include a request in your offer for every associations' documents that you are required to be a member of when purchasing in that community. Keep in mind, for the homeowner's association, there is no time frame by law for you to review and cancel unless you did not receive the disclosure. Therefore, the wise course is requesting a copy of the documents within your offer and a specified time frame for you, and/or your Florida attorney, to review them.

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About the Author

Gulf Coast Associates, RealtorsBenjamin Dona is the Broker and Owner of Gulf Coast Associates, Realtors in Bonita Springs, Florida. He holds two advanced degrees, an MBA and an MA, and has an extensive background in both business and marketing. In 1998, he founded Gulf Coast Associates, and formed a group of like-minded Realtor® associates dedicated to offering professional Southwest Florida real estate services by concentrating on information, education and the use of leading edge technologies. He also is a recognized expert on the "Net," a much-quoted and read blog author, and a contributor to both national and international news outlets. Benjamin is a member of the National Association of Realtors, the Florida Association of Realtors, and numerous local real estate boards throughout Southwest Florida.

Contact Benjamin Dona at 239-948-3955


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