PUD VS Condominium: Serious Differences Exist
I’m sure you’ve heard or read these terms when talking or reading of something real estate-related. They’re kind of odd sounding. Hard to forget.
But beyond their rather funny names, what are they? What are their characteristics? And when you buy/own one, what determines legal ownership?
First: Condo (short for Condominium), is probably the most commonly heard of the two terms. A Condo property (typically referred to as a “Unit”) lies within a legally platted Condominium site having a legally formed “Condominium Association”.
A Condo property is established and recorded as such. The recorded documents also establish “Declarations and By-Laws” and rules (known as covenants). The rules outline, detail, and mandate how the Condominium Association runs.
In short, a Condominium is actually a designated legal method of home ownership …
Condominiums share some similarities with PUDs. And for that reason, anyone considering the purchase of a Condo should make sure to check what legal form of ownership and property they’re considering.
To accomplish that, a potential borrower must check the Condo Declarations and Legal Description for the subject property. Simply viewing the property does not reveal legal ownership.
Above I referred to Condominium Associations and the fact that they have “covenants”. It’s wise for all prospective Buyers to educate themselves fully regarding the details of the Covenants/Rules for their potential new home prior to entering into a Contract to buy. (At this time, it’s also crucial that potential Buyers obtain information regarding the financial “health” of their future Association.)
When a Buyer purchases a Condo Unit, they purchase the individual right to only their Unit. The Homeowners Association “owns” the land on which the Units sit. A new Unit Owner becomes an “equal owner” of the commonly owned facilities within the Condo project (should there be any) with other Condo Unit Owners.
Facilities and services found within their Condo Association can include Common areas. Common Areas are defined as those areas of multi-owner real property meant for the exclusive use of all individual owners.
These areas are maintained by the HOA with the Homeowners Fees/Dues paid by each Unit Owner. These fees are typically paid monthly to the Homeowners Association or their professional management company, but other payment arrangements can exist.
- Examples of Common Areas are: Hallways, Laundry Rooms, Storage Areas, Balconies, Patios, Mechanical Rooms, Parking Lots, Driveway Access, etc.
- Common Area Recreational Facilities can include: Green Areas, Playgrounds, Water Retention Areas, Pools, Tennis Courts, Exercise Facilities, Security Gates, Party, Clubhouse, or Recreation Rooms, etc.
- Typical HOA Services can include: Snow removal, landscaping, exterior maintenance of units and Common Areas, and more.
Homeowners Associations often have established rules that must be followed by property owners. These rules come in the form of Covenants, Conditions, & Restrictions … known as CC&R.
Things commonly covered by the CC&R are:
- Noise Level Restrictions
- Smoking Restrictions
- Pet Ownership
- Use of Clubhouse, Pool, Tennis Courts, etc.
- Parking Restrictions
- More …
Again, it’s wise for potential buyers to educate themselves thoroughly regarding HOA rules prior to signing a contract for purchase. Why? Some HOA rules and regulations can prove to be a poor fit and not fulfill the needs of some Buyers. Better to be aware and know this info upfront.
Second: The funny sounding name PUD? It stands for Planned Unit Development.
The biggest difference between the two types of properties … PUD and Condominium … is a legal one. PUDs are a different legal classification of ownership from Condos.
Let me say that again …
The Buyer’s legal ownership held in the two types of properties is different. PUDS feature ownership of an individually-owned parcel or site. In other words, the unit owner owns the land on which the unit lies (and possibly even some land that surrounds it). That is in stark contrast to Condominium ownership.
PUDs can be made up of attached or detached units. Planned Unit Developments can exist of condominiums, townhomes, single-family homes and even retail and commercial space may sometimes be found within these developments.
Like a Condo, a PUD is governed by a Homeowner Association (HOA) that mandates HOA Fees be paid by individual unit owners. These HOA Fees cover the upkeep, maintenance, and repair of common areas and facilities.
Because of the differences between these two properties legal ownership, I can’t stress strongly enough once again how important it is that legal ownership of a property be firmly defined and established prior to a Buyer entering a purchase contract. (If the Buyer is obtaining a mortgage to purchase the property, this will be of vital importance to the Lender also.)
The legal ownership of the property cannot be determined by appearance or physical aesthetics of the property alone. Other documentation or descriptions can contain clues as to legal ownership, but the only foolproof way to determine if a property is a PUD (or not) is via a review of the Covenants & Restrictions for the development.
Although the names Condo, Condominium, or PUD may sound funny … there’s nothing funny about a Buyer contracting to purchase one legal form of property when they believe they are buying another. It’s why I stress the importance of potential Buyers not overlooking this first vitally important step.