In southwest Florida, and elsewhere in Florida, many properties are located in deed restricted communities. These are not necessarily a gated community with golf and tennis that may come to mind right away. Although, gated communities most certainly are deed restricted. Any side street in any given neighborhood could well be in a deed restricted community. Deed Restricted Community (DRC) A DRC quite simply means that along with title to the property comes a set of rules that runs with the land and you must abide by them. The rules typically regulate items like size/type of home, architectural style, parking for certain types of vehicles, rights to community pool, beach club, boat dock or ramp if any and items similar to these. DRCs are managed by a group, typically an association that is organized as a corporation. Various Association Types There are several types of associations. Each has a specific purpose and what the association is called usually relates to the ownership type of the property - single family home, condominium (condo), or cooperative to name the most common. For any and all association that you are required to be a member of, you must be presented with a disclosure that details the required fees, both one time fees and ongoing dues/assessments. The various associations and clubs talked about following all have lien rights on real property in these communities for non-payment and they can initiate foreclosure proceedings also. Condominium Association (Condo) - Many are familiar with this. When you own a condo it's typically, but not necessarily, in a building with other units. With condo ownership everyone shares in the ownership of the common areas equally or based on some predefined formula. The common areas, for example, include the structure (floors, walls, ceiling...etc) of your particular unit/building, club house and pool if any, and any other structures like a boardwalk over the dunes to the beach! All owners of a condo are members of the condo association and pay a condo association fee. The fee typically includes monies for repair and maintenance, reserves for major capital expenditures, structural insurances, and liability insurance for the common areas. It is easier to define the common areas by defining what is not - the interior walls of each individual unit and everything within, in general. The condo owner will need to buy a condo-owner's insurance policy. This is very similar, but exactly the same, as apartment renter's policies. The cost for these is typically very low especially when comopared to a homeowner's policy. When comparing monthly costs be sure include the cost for insurance plus the condo fee. The primary reason for the lower cost is that the building structure insurance is part of the condo fee as it is common property. Home Owners Association (HOA) - is a corporation formed to manage a group of single family homes. HOA fees are levied to run the corporation and pay for items like common area maintenance, capital maintenance (e.g. club house or pool), capital replacement items (e.g. new roof), new capital projects, and insurance. The fees can include the exterior maintenance of lawns and landscaped areas. HOA fees typically are lower than condo fees but be sure to include the cost of insurance when determining your monthly cash flow. Master Homeowners Association (Master) - This is more accurately a Master Property Owners Association (POA) as the corporation formed will usually own, through deed, property that is common to a development where there are one or more HOAs and/or condos. Example: A development may be called, say, Blue Waters. When you buy a property in Blue Waters it may be a condo in the Little Blue Lakes community within or a single-family home in the Grande Lakes community within. Every owner in Blue Waters either owns a condo in Little Blue Lakes or a home in Grande Lakes. Each would be a member of their local condo association or HOA and a member of the Master. The primary responsibility for the association is to maintain the property owned which can include common grounds, buildings, and roadways and to promote safety and security for the community.
Club, Country Club, or Golf Club - Depending where you purchase your home you may be required to be a member of "the club" and pay dues, capital contributions, and/or assessments related to the club. Some clubs impose a food and beverage minimum. If you are looking in a community with these types of ammentities be sure you get a disclosure from the Seller that outlines any mandatory membership and fees.
What do you pay? Every property owner will pay an HOA fee if your home is in a DRC controlled by an association or a condominium fee. Additionally, if your property is part of a larger development there will most likely be a Master Association fee to pay also. Homeowner Association and Condominium (Condo) Fees - How much do you pay? It is often asked what is the formula to determine the fees? While a simple question, the answer is not so. The Board of Directors has the primary responsibility to repair, maintain, and insure all common grounds, areas, and structures. The responsibility can extend to other areas such as security for the development and/or building(s). The fees, therefore, become a simple calculation of the amount of money required divided by the number of contributors. However, the simple computation of expenses is not sufficient because the Board must plan for obsolescence, capital items replacement (e.g. roof in condos, roadway in developments, swimming pools...etc), and other items. The Board is bound to plan for these items, establish capital reserve accounts, and to collect additional monies for these purposes. Usually all these expenses are split equally but, in certain communities the expenses can be alloted on a pro rata basis with regard to lot size and/or home and condo size in square feet. Computations and Calculations for Reserves for Capital Items A question often asked is how much should be held for reserves? The Association needs to ensure there will be sufficient money available for each and every major capital item replacement. Mechanical items (pumps, motors, air conditioners...etc) and physical items (road surfaces, monuments, signs...etc) don't last forever. They either wear out or deteriorate over time due to exposure to the elements. If enough money is not collected over time special assessments will ultimately be necessary. The formula is simply the estimated replacement or major repair cost for the item divided by estimated useful life of the item in years. The result will determine the amount of money to be reserved each year to deal with the replacement when required. The annual amount is then levied as part of the annual budget to each paying unit. It's very important to collect these monies regularly from all owners. If the association does not and then must special assess to provide the funds, the current owners will be unduly burdened to pay an unfair share for the amount of use they enjoyed for the items. e.g. In a new complex that is not collecting reserves from the beginning will find that owners that sell and move out in one or two years will not have contributed their fair share for their use of the capital items. The association's management company can help determine the useful life for various items - e.g. pumps and motors 5 - 7 years, road surfaces 20 - 25 years. Other Fees and deposits... Transfer fee - Associations are corporations formed in the state of Florida. They all operate with an annual budget. To help offset the costs associated with processing applications for buyers and renters as well as general expenses for the association some have enacted a transfer fee paid by the new owner upon transfer of the property. Without application to the association and payment at closing of the fee, the transaction will not close. Miscellaneous fees - Depending on the particular development and locale, there may be fees for cable TV hooked up and utility deposits. |