Everything New Condo Owners Need to Know About Homeowners Association

If you are in the process of buying or moving into a condominium, it’s helpful to do some reading up on homeowners associations (HOAs) beforehand. HOAs play a critical role in managing and maintaining condo communities.

Here is some insight into the important workings of homeowners associations.

What is a Condo HOA?

By definition, a homeowners association is a legal entity that governs a community of homes, including subdivisions, condominiums, townhomes, or planned community. HOAs operate within state statutes to enforce regulations and collect assessments from homeowners, while also taking care of maintenance repairs of common areas.

Homeowners Associations have been around since the mid-nineteenth century. 1844 marks the year that the first HOA was founded in Boston, Massachusetts. However, HOAs did not pick up much traction until the 1960s. This was a period of rapid national growth for the United States, and suburban development specifically was booming.

Since this time of growth, HOAs have been on a constant rise in America.

When new communities are developed, new HOAs also come into creation. Local laws and ordinances govern the formation of homeowner associations.

While the process for establishing an HOA may look different depending on the location, there are standard procedureswhich generally require the following:

  • Establishing a business structure by forming an LLC or nonprofit corporation
  • Creating covenants, conditions, and restrictions (CC&Rs) that describe how the HOA will operate and what rules homeowners must abide by
  • Establishing a procedure for future modification of the CC&Rs
  • Writing rules and regulations that put the CC&Rs into easy-to-understand language for community residents
  • Drawing up governing documents, such as articles of incorporation and bylaws (which outline meeting frequency, voting guidelines, the election of HOA leaders, and other operating procedures)
  • Electing qualified officers/board members

Upon establishment, the HOAs main mission is to manage issues that affect the entire community, such as safety and security or property maintenance.

Condo HOA Fees

To effectively operate, homeowners associations need funding. Where exactly does this funding come from? The answer is from the condo owners.

When someone buys a condominium, they become an automatic member of that community’s HOA; and with this membership comes unavoidable monthly or annual dues. These fees are in required to help fund community amenities, such as a pool and gym, and provide services including garbage removal and building maintenance.

A smaller portion of these funds goes towards the HOA’s administration, including legal, accounting, and management services.

It’s important to know that different HOAs have different policies regarding what services they will provide for the condo community. That is why before purchasing a condo, investigate what exactly the HOA offers residents.

So what happens if you do not pay those HOA fees? While the repercussions may vary depending on what state you are in, there are basic penalties that are likely to be put into action.

First, be prepared to receive a letter reminding you of your outstanding debt immediately. The HOA may also add on a fine and/or interest on that missed payment.

Often, the HOA may also revoke homeowner rights. This may include taking away your privileges to vote on HOA matters or utilize common areas, such as a gym or pool.

To avoid these consequences, it is critical to keep up with HOA fees; and if you do happen to miss a payment, make sure to keep open communication with your HOA board to resolve the issue and minimize penalties.

Do Condo HOAs Have Insurance?

While condo owners are responsible for insuring the inside of their units, HOAs are also required to obtain their own insurance policies to keep the organization protected.

Homeowners associations must have hazard and liability insurance for specific areas of the condominium development, often including common areas, like stairwells and pools, and some exterior elements such as the condo’s roof.

While this insurance takes some of the financial and liability burdens off unit owners, a portion of owner’s condo fees helps to pay for the policy.

Frequently, HOAs will also have what is called a “master policy”. This type of policy generally covers damages and personal injury. The damages covered by a master policy involve damages to the shared property, which may be a result of storms, fires, criminals, etc. General liability insurance covers costs of any lawsuits for medical expenses filed by people injured in the common areas of the property.

It is also important for HOAs to have directors and officers insurance to ensure financial protection to the people running the HOA. This specific type of insurance covers both legal defense costs and damages if a homeowner decides to sue its HOA. This policy does not cover intentional misconduct. Employee theft insurance can protect the association if a director, officer or property manager embezzles HOA funds.

Condo HOA Rules

Upon establishment, every homeowners’ association creates rules and regulations for condo owners to follow, but the formal organization is also expected to follow certain guidelines.

While some local laws and ordinances dictate how condo HOAs need to be formed and operated, generally HOAs have a large amount of freedom.

Each HOA can create their own covenants, conditions, and restrictions (CC&Rs) that condo owners are expected to follow. These CC&Rs cover expectations regarding resident behavior, architecture, and common responsibilities.

Many common condo rules and regulations revolve around financial responsibilities, pet regulations, rental guidelines, and maintenance standards.

Whatever the CC&Rs may be, they are not voluntary. Residents have a legal obligation to follow these condo HOA rules or they may face fines and/or legal action.

What Can a Homeowners Association Do?

Ultimately, homeowner associations are in place to help maintain the quality of life for community residents and protect their property value.

Even if residents find themselves complaining about all of the mandatory rules HOAs have in place, many are quick to admit that these regulations truly do help hold community members accountable to help preserve the neighborhood and even increase the property value for each condo.

How exactly can HOA have a positive impact on the value of homes? Well, primarily through maintaining curb appeal. The HOA rules and regulations ensure that the neighborhood stays in tip-top shape to keep the neighborhood desirable for potential buyers. Keeping the community in pristine condition also enhances the environment for current residents.

To make sure that community members help achieve this goal, the HOA holds owners accountable through rules and fees. The rules restrict residents from trashing the outside of their units, and the fees provide funding for external maintenance.

How Do Townhome Associations Work?

The major difference between townhomes and condos comes down to ownership. Condo owners have title to everything within the unit, while townhome owners have the right to the inside of the unit as well as the land that the unit sits on.

Despite this difference, townhome associations operate very similarly to condo HOAs. Both are responsible for maintaining the common grounds, structures and systems in the community and both rely on funding from unit owners.

Often, townhome owners are responsible for more upkeep than condo owners, which means HOA is less involved. This lower involvement by HOA frequently results in lower monthly dues for townhome owners.

Since townhome owners own that land that their property sits on, they may be responsible for maintaining the outside. However, frequently HOA will still take care of this area through monthly fees.

By answering the question “what is an HOA?” and providing a better understanding of this operation, we hope you feel more confident to take the next step in purchasing your dream home!

Where Can You Find Co-op Chicago Housing?

Around the 1940’s, architecturally significant buildings in some of Chicago’s finest neighborhoods began undergoing conversion into co-ops for many of the city’s leading families.

While many of these original co-ops still exist, the cooperative Chicago housing market is expanding. Not only are new co-ops sprouting up, but this type of housing has become more affordable, opening up opportunities for more residents.

Where Co-op Chicago Housing is

In Chicago, you will easily find co-op housing in the best parts of the city with the greatest views. Neighborhoods like Lakeview, Lincoln Park, Gold Coast, and Hyde Park boast incredible pre-War and Art Deco cooperative buildings.

Cooperative Communities of Chicago offers a fantastic resource for anyone looking to learn more or find a co-op property in the city for themselves. Not only does this co-op hub offer insight and advice to prospective buyers, but it also provides a directory of currently available co-op listings in the Chicago area.

New Co-op Opportunities on the Market

Historically, co-op housing flourished on the north side of Chicago. However, the tides are changing, and Qumbya Housing Cooperative is bringing co-ops to the Bronzeville neighborhood. This cooperative offers four buildings with 70 units. In

Logan Square has also seen various co-ops recently pop up on the market. The Ema Goldman Cooperative offers beautiful multi-family living quarters in a unique 1920’s era flat. Check out the available unit with three bedrooms, two-baths

The Pilsen Housing Cooperative is a fresh project opening up multi-building co-op housing on the lower west side of Chicago.This cooperative is the first limited-equity housing cooperative in the Pisen neighborhood.

Co-ops with Unique Amenities

If you are looking for all the bells and whistles, 1500 North Lake Shore Drive, situated in Gold Coast, offers one of Chicago’s most exclusive cooperative housing. The stunning building boasts enormous units, incredible views of Lake Michigan, and uniformed staffers to fetch residents’ cars

3750 North Lake Shore Drive offers expansive floor plans inside a beautiful neoclassical building right next to the Belmont harbor. The vintage pool remains a favorite amenity among guests.

Over in Hyde Park, Powhatan Apartments offer the premier cooperative on the south side. Along with the impressive architecture and interior deco, the building provides residents with staffed elevators, an indoor pool, rooftop deck, and large ballroom.

For house hunters desiring environmentally sustainable living, check out HUB Housing Cooperative in Chicago’s Little Village neighborhood. This six-unit apartment building, with two units currently available, offers residents a large storage space for bicycles, compost recycling, and community sustainable agriculture.

Regardless of which type of co-op you are looking for, the Chicago cooperative housing market offers a wide variety of properties all throughout the city.

Contact an experienced real estate expert today to help find the co-op that best fits your needs today!

Condo vs. Co-op Taxes — What You Can Expect

If you are in the midst of deciding between a condo or co-op, it is important to weigh a variety of factors between each property- one of those factors being taxes.

Understanding condo vs. co-op taxes may help you narrow down which type of home makes the most sense for you.

How Taxes for Condos Work

While property tax is imposed the same way on condos and co-ops, the difference comes down to how the taxes are paid.

When purchasing a condo, you are gaining title to a single unit. This means that you own everything within the walls of your unit. Everything outside of the unit, known as the common areas, is shared and owned by all of the condo owners collectively.

Due to the nature of condo ownership, owners are expected to pay separate and individual property taxes on their unit directly to the city.

Since condo owners pay the mortgage directly to their lender, the purchase of a condo is known as a “fee-simple” purchase.

How Taxes for Co-Ops Work

Unlike condo ownership, obtaining a co-op involves purchasing shares to a corporation which owns the co-op building, rather than gaining title over an individual unit.

Because of this difference in ownership, co-op taxes are payable on the entire building as one entity. Then that cost is allocated based on the percentage interest of the co-op owners through maintenance fees.

For example, if a co-op shareholder owns 15 percent of the corporation, then they are responsible for paying 15 percent of the building’s assessed property taxes.

Factors that Can Affect Your Cost

The cost of property taxes for both condos and co-ops are dependent on the mill levy and the assessed value of your property.

The mill levy is simply the tax rate imposed on your property value and varies depending on the tax jurisdiction.

The assessed value of your property is an annual estimation of the reasonable market value of your condo or co-op based upon local real estate conditions. These conditions may include factors such as the selling price of similar properties in the area, replacement costs for the property, and maintenance costs for the property owner. Market Value is depended on factors such as the size and location of a property.

Multiply the mill levy by the assessed value to determine the property tax for your home.

Generally, condo owners can often expect higher property taxes due to a higher market value. Condominiums are commonly newer, larger, and feature more amenities than co-ops, hence the higher market value and property taxes.

With more insight into condo vs. co-op maintenance fees, we hope you can feel more confident in choosing the right property type for you!

Co-op vs Condo Advantages and Disadvantages

If you are debating between cooperatives (co-ops) and condominiums (condos), it is essential to understand that these distinct properties each come with their own set of pros and cons.

Here is everything you need to know about co-op vs. condo advantages and disadvantages so that you can better weigh your options to find the perfect home.

Responsibilities of Living in a Condo

Many people chose to live in a condo because this property offers residents major convenience.

The list of owner responsibilities is minimal compared to other properties, but here are a few standard expectations of condo residents:

  • Adhering to HOA’s governing documents– As a member of HOA, condo residents must follow the rules and regulations that HOA mandates. These governing documents commonly contain rules dealing with matters such as leasing the units and altering the interior of units.
  • Paying HOA dues– Condo residents enjoy convenient living because HOA manages most of the maintenance and upkeep of the external area of the building, including shared spaces. To fund the service provided to residents, all unit owners pay monthly or annual fees.
  • Paying HOA assessmentsOccasionally HOA will need to charge residents additional fees to cover for special projects or unforeseen expenses not covered by regular HOA fees.
  • Insurance and taxes– Just like any property ownership, insurance and taxes are required.

For a closer look at condo responsibilities, check out the Illinois Department of Financial and Professional Development.

Responsibilities of Living in a Co-Op

When it comes to living in a co-op, tenants must follow all of the duties laid out in their proprietary lease.

Similarly to condo requirements, those living in co-ops are still responsible for abiding by the governing documents, as well as paying monthly fees and any additional assessments. However, instead of paying HOA, these fees go to the cooperative. The fees that each co-op resident pays is dependent on the number of shares that a person has in the company that owns the building.

Co-op residents are also responsible for paying taxes and providing insurance. However, they do not need to worry about covering title insurance because they are not purchasing ownership of the physical unit.

Pros and Cons of Condos vs. Co-Ops

Here is a quick look at the major pros and cons of living in condos and co-ops.

Condo pros:

  • Less extensive buying and selling process
  • Less expensive HOA fees
  • Leasing out or flipping property is generally allowed by HOA
  • A better investment
  • Many property listings on the market

Condo cons:

  • Higher owner turnover rate
  • Higher entry costs
  • Additional costs for title insurance
  • Residents do not have a say in who lives in the building

Co-op pros:

  • Low entry costs
  • A better deal per square feet
  • Residents often have a say in who moves in
  • Long-term residents which promote close-knit communities
  • Known for being well-managed

Co-op cons:

  • Extensive and often long buying/selling process
  • Higher monthly fee (these fees include property taxes)
  • More difficult to obtain financing
  • Do not make good investments (generally no leasing)
  • Not as many co-op listings on the market

With more insight into condos vs. co-ops hopefully you can feel more confident in making the big decision! Keep in mind that an experienced broker can also help streamline this process.

How Does Cooperative Housing Work?

While cooperative housing, also known as co-ops, closely resembles condominiums, this type of property functions in a unique way. Here are all the ins and outs of cooperatives.

What is Cooperative Housing?

Cooperative housing provide multiple units in a single building which often offers residents common shared space similarly to condos.  However, instead of purchasing title to the property, buyers acquire shares into a corporation that owns the building.

Co-ops often feature old historic buildings, boasting stunning architecture, unbeatable character and unique floor plans in each unit.

Residents may get a few units on each floor or even multiple stories. Generally, the larger the apartment, the more shares the buyer must purchase.

How do you Get into a Co-op Building?

When it comes to obtaining cooperative housing, buyers should know that it is a more restrictive process than condo purchases for a few reasons.

While cooperative housing allows financing, there are many more limits in place compared to condo purchases. Also, current co-op shareholders often have a say in who moves in the building.

Buyers often must go through an approval process to make sure they can afford their share of the building. This process frequently involves an application, a detailed balance sheet, and several personal and professional letters of reference. Some co-ops also request to see tax returns. Once the co-op board has received and reviewed the buyer’s application, an interview is scheduled, and then the buyer may be officially approved.

When homeowners are ready to leave a co-op, instead of selling the unit, he or she must resell their shares in the co-op. Depending on the housing cooperative, the shareholder may have to sell the stock back to the corporation at the original purchase price. Then when the corporation finds a new buyer for the unit, the profit is divided and distributed among all of the co-op shareholders. In other co-ops, the original shareholder may get to keep the profits.

When reselling co-op shares, the process of approval for a new shareholder looks identical.

Is there any resale value?

Since the primary benefit of buying shares to a co-op is a better value for your space, it is not an ideal property for an investment or profiting after a resale.

Cooperatives promote long-term residency, as opposed to many condominium buildings.This is why buyers are discouraged or prohibited from leasing or flipping the unit for investment.

Oftentimes, when co-op residents are ready to move, they are required to sell their shares back to the corporation for the original purchase price, with all of the shareholders collectively sharing the profit once the the shares are resold. In other cases the shareholder moving will get to keep the profit.

If you are a prospective buyers looking for a home that provides charming character, great value, and a sense of community, find an experienced broker and begin the search for the perfect cooperative housing today!

What’s The Difference Between a Co-op and a Condo?

When shopping for the perfect apartment, home buyers may consider cooperatives (co-ops) and condominiums (condos). While both property types share a resemblance, prospective buyers need to be aware of the differences between co-ops and condos.

What Condo Housing Is Like

Condos and co-ops are similar in the fact that they are separate units in a single building with shared common areas, such as a lobby or outdoor recreational space.

The main discrepancy between the two property types comes down to the ownership terms of the units.

When a buyer purchases a condo, he or she is gaining a title or ownership of the individual unit. Condo owners are expected to pay fees to HOA, which manages and maintains the exterior and shared spaces of the community.

Due to a large amount of shared common space in condominiums, it is not uncommon for neighbors to cross paths. While the common areas vary depending on the specific condo community, many condo residents share hallways, stairs, lobbies, elevators, parking lots, and common building entries and exits.

What Co-Op Housing Is Like

Co-ops, on the other hand, are owned by a corporation. This means that rather than acquiring title over the physical unit, the buyer purchases shares of the company. A shareholder of the company is entitled to a proprietary lease, giving him or her the right to occupy a specific dwelling unit.

Co-ops, specifically ones situated in Chicago, often feature old historic buildings, boasting stunning architecture, unbeatable character and unique floor plans in each unit.

In a cooperative building, residents may get a few units on each floor or even multiple stories. Generally, the larger the apartment, the more shares the buyer must purchase.

When it comes to obtaining cooperative housing, buyers should know that it is a more extensive and restrictive process than condo purchases.

What are the Communities Like

Condo and co-op living can vary dramatically depending on what services and amenities the community offer, as well as where the building is situated.

Some communities offer residents top-notch luxury, with features such as 24-hour gyms, pools, and saunas.

Because residents in both condos and co-ops live in close proximity to neighbors, there is often a higher sense of security and community in these buildings as opposed to single-family homes.

However, condos have a higher turnover rate than co-ops, meaning that it may be more challenging to develop long-term relationships with neighbors.

Co-op residents usually get a say as to who gets to move into vacant units, making these properties more selective and unified.

The condo vs. co-op battle is one without a clearly defined winner. Both property types offer homeowners unique living experiences. Find an experienced broker today to help find the property that best fits your needs!

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