Understanding Condominium and PUD Ownership

Recently a relative of mine who purchased a “townhouse” a little while back with another realtor friend of his was asking me to find out why he was not able to get an FHA reverse mortgage due to owning a condominium… he thought he had purchased a “townhouse.”

I said I would look into it for him, but I explained to him that if the ownership type said that it was a condo, it could very well still be called a townhouse because that is very common. Often people think of townhouses as being units that have a number of stories and they think of condos as being one level where there could be a number of stories to the building. They assume with a townhouse you automatically own the land, while a condo you only own the physical space of the unit and not the land. This can understandably be confusing, so I thought I would dig up some info to help explain the differences between condominiums and what are known as “planned unit developments” or PUDs. I was taught to remember that the difference between a Planned Unit Development and a condominium development is, “With a PUD you get the mud!”

The following information was graciously provided to me by one of my favorite title company reps from Chicago Title and I hope it will help to clarify some of the intricacies of condo vs PUD ownership:

California’s builders, in an effort to combat the dual
problem of an increasing population and a declining
availability of prime land, are increasingly turning to
common interest developments (CIDs) as a means to
maximize land use and offer homebuyers convenient,
affordable housing.

The two most common forms of common interest
developments in California are Condominiums and
Planned Developments, often referred to as PUDs. The
essential characteristics shared by these two forms of
ownership are:

Common ownership of private residential property;
Mandatory membership of all owners in an
association which controls use of the common property;
Governing documents which establish the procedures
for governing the association, the rules which the
owners must follow in the use of their individual lots or
units as well as the common properties; and A means by
which owners are assessed to finance the operation of
the association and maintenance of the common
properties. Before continuing further, it may be helpful
to clarify a common misconception about Condominiums
and PUDs. The terms Condominium and PUD
refer to types of interests in land, not to physical styles
of dwellings. Therefore, when homebuyers say that
they are buying a townhouse, that is not the same as
saying that they are buying a Condominium. When
homebuyers say that they are buying a unit in a PUD,
they are not necessarily buying a single-family detached
home. Though the townhouse is the most common style
of structure found in common interest developments
in California, a townhouse might legally be a
Condominium, a unit or lot in a Planned
Development, or a single-family detached residence.
The terms Condominium or PUD will say a great deal
about the ownership rights the buyer will receive in the
unit and the interest they will acquire in the common
properties or common areas of the development.

Common interest developments offer many
advantages to homebuyers-low maintenance and access
to attractive amenities-however, there are restrictions and
duties which come with ownership of a Condominium or
PUD that buyers should be aware of prior to purchase.

To acquaint you with various aspects of ownership in
common interest developments, the California Land
Title Association has answered some of the questions
most commonly asked about Condominiums and PUDs.

What are the basic differences between ownership
of a Condominium and ownership of a PUD?

The owner(s) of a unit within a typical Condominium
project owns 100% of the unit, as defined by a recorded
Condominium Plan. As well, they will own a fractional
or percentage interest in all common areas of the
Condominium project.

The owner(s) of a lot within a PUD own the lot which has
been conveyed to them-as shown in the recorded Tract
Map or Parcel Map-and the structure and improvements
thereon. In addition, they receive rights and easements
to use in common areas owned by another-frequently
a homeowner’s association-of which the individual lot
owners are members.

The above are basic descriptions and should not be
considered legal definitions.

Besides ownership of my unit, what other
amenities (common areas) will I be acquiring use
of and how will I own them?

Common interest areas may span the spectrum from
the ordinary-buildings, roadways, walkways and utility
rooms-to the extravagant-equestrian trails and
golf courses-with more usual amenities including
community swimming pools and clubhouse facilities.

Your ownership rights in common areas will be spelled
out in your project’s Declaration of Covenants, Conditions
and Restrictions (CC and R’s). The subject of CC and R’s
will be expanded upon later in this brochure.

As we stated in the answer to the previous question,
Condominium owners own a fractional or percentage
interest in common with all other owners in the
Condominium project, in all common areas. PUD owners
receive rights and easements to use of common areas
through their membership in a homeowner’s association,
which typically owns and controls the common areas.
Some PUD projects, however, provide that the individual
homeowners will own a fractional interest in the common
areas. Again, in this case, a homeowner’s association will
have the right to regulate the use of the common areas
and to assess for purposes of maintaining the common

Check your CC and R’s and association Bylaws (basically,
rules governing the management of the development)

to insure that you understand your rights to use of your
unit and common areas.

What services will my homeowner’s assessments
help to finance?

Your homeowner’s assessments support not only the
easily recognizable-building and swimming pool upkeep,
landscape maintenance-but also the unseen-association
management and legal fees and association insurance.

As well, reserves must be factored into your
assessments, including reserves for replacement of such
items as roadways and walkways. In the case of Condominiums,
where ownership is usually limited to airspace
within the walls, floors and ceiling of the unit, reserves
will frequently fund replacement of such items as roofs
and plumbing.

Each member of the homeowner’s association, upon
purchasing their unit, must receive a pro forma
operating budget from the association. Basically, this will
be a financial statement of the income and obligations of
the association, which must include an estimate of the
life of the obligations covered under the assessments and
how their replacement is being funded.

What happens if I fail to pay my homeowner’s

Delinquency fees will be added onto the unpaid assessments.

Should your delinquency continue, the association has
the right to place a lien upon your property. The lien may
lead to a foreclosure if the delinquency is not paid.

Of what importance are CC and R’s and Bylaws?

CC and R’s and Bylaws are the rules and regulations of
the community, meant to guide the use of individual
properties and common areas. Buyers should be aware
that CC and R’s and Bylaws may be written so as to
restrict not only property use, but also to restrict
owners’ lifestyles, for instance, spelling out hours during
which entertainment, such as parties, may be hosted.

CC and R’s and Bylaws are highly important and should
be thoroughly examined and understood prior to
purchase. They bind all owners and their successors to
the rules and regulations of the community. Failure to
follow those rules and regulations can be considered a
breach of contract. Legal action may be taken against the
homeowner for any such breach.

At what point in the real estate transaction will I
be allowed to review a copy of my CC and R’s and

Legally, it is the responsibility of the owner to
provide the prospective purchaser with the governing
documents of the development (CC and R’s and Bylaws),
the most recent financial statement of the homeowner’s
association and notice of any dues delinquent on the

The law states that these items should be delivered
as soon as practicable; however, the prospective
buyer should request to see them as early as
possible. If you do not fully understand what is
stated in these documents, consult a real property

Should I object to items included in the CC and
R’s and/or Bylaws, will I have the opportunity
to terminate those items prior to taking ownership?

No. The process required to terminate these restrictions
is often complex and costly. Termination of restrictions
will require, at least, a majority vote by members of the
homeowner’s association, and may require litigation.

What if I have further questions regarding
Condominium and PUD ownership?

Ask any questions you may have before you buy! Don’t
wait to take ownership to find out about restrictions
and regulations affecting your homeownership rights.

The questions and answers on this article are
provided to you by the CLTA and are intended to
provide a brief overview only. Should you have further
questions or seek more extensive information about
Condominium and PUD ownership, consult a real
property attorney or your licensed real estate agent or

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