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Saturday, November 14, 2015

It’s a Site Condo. What have I gotten myself into?

As would be home buyers wander around in their cars or spend hours on-line looking through listings, they are usually not aware of the fact that they are oft times wandering into and out of
condominium complexes. After all the homes are all separate and have their own yards. It’s a subdivision, right? In Michigan most of the tie the answer would  be no, if the “subdivision” is newer. Since the mid-1980’s Michigan developers have found it quicker and easier to apply for all of the necessary permissions to build under Michigan’s Condominium Law, rather than under the older Land Division Law that governs true subdivisions.  What they end up building has been given the name “Site Condos”.

There is no legal description of the term Site Condo m in the Michigan Condominium Law; however, it is the common usage term for a development where everyone owns their own plot of land and their individual house, but they are also co-owners of a variety of “common elements” – things like the streets in the complex, the entrance island and any amenities such as park spaces or playgrounds that might be shared by all residents in the complex.  Not only do they share ownership of those common elements, they also share responsibilities for them and are required to join the Home Owners Association (often called a Condominium Association) for the complex and to pay the dues for that membership.

The need for such an association is clear when you stop to think about the consequences of the shared ownership of the common elements. While each individual homeowner is responsible for things such as insurance, upkeep and maintenance for their own plot of land and the house on it; it is the Home Owners Association (HOA) that is responsible for those things for the common elements. Probably the most important and the item of biggest potential cost is the maintenance of the roads in the complex. You may think that the City or Village or Township or County has that responsibility. Wrong! Remember that you live in a condo complex. The maintenance of the roads and things like snow removal  in the winter are the responsibility of the Home Owners Association. That’s why they collect a monthly HOA fee. The HOA also pays for the maintenance of any entrance improvement to the complex (usually a sign and perhaps a small island at the entrance). They also pay for liability insurance on the common elements. This protects the owners is someone is injured while using the common elements.

When considering buying into a Site Condo complex there are things that you need to check and rights for information that you have in order to evaluate the state of the HOA and potential future liabilities. You should download and read through a copy of the Condominium Buyers Handbook , which is published by the State of Michigan. You should make sure that any offer to purchase a Site Condo is made contingent upon  your right to review the the Master Deed and the By-Laws of the Homeowners Association within a reasonable period of the offer being accepted (usually 3 days). You really should do that before you even make the offer. Then you should thoroughly read through both documents to see if there are terms and conditions (usually deed restrictions or HOA rules) that you cannot live with. You have the right to back out of the deal is that is the case (assuming that you put that review contingency in the offer).

Before you get all upset at the monthly HOA fee that you might see in the listing, remember that
those fees are being collected (and hopefully well managed) to provide the money needed for valuable services, such as snow removal, sidewalk (if there are any) maintenance and liability insurance on the common elements of which you are a co-owner.  In fact you should ask to see the HOA financial reports to make sure that Association is collecting those fees and investing them for future use. That’s a good thing. Don’t feel good about finding a Site Condo development where the HOA fees are really low. That means that they are not saving for future needs. Why is that important? Because some day the roads in the complex will need repair or replacement; and, when that day comes, the alternative is that each owner in the complex is hit with a special assessment for the costs. That can be big bucks. I know of one case where every homeowner was hit with a $20,000 assessment because they had not been collecting for the eventual road replacement that finally came due.

So, buyer be aware (not beware) that it is your due-diligence responsibility to read and understand the responsibilities and obligations that are associated with buying that house. In cases where you used to be happy saying “they will take care of that”; you are now the “they” in that sentence. They’re your roads and your entrance and your playground or park and it’s your responsibility, through the HOA, to take care of them.  There could even be liens on the property due to disputes between the previous owner and the Association. HOA’s have even been known to initiate foreclose proceedings. .

Also be aware that the HOA By-Laws give the association great power over other things that you may think are rights of the individual homeowner. The HOA can have rules governing the type, size and number of dogs or other pets that you can have. The HOA will likely have rules that prevent you from putting up fences or out-buildings. There may even be rules about how often you have to paint your house and even restrictions on the colors that you wish to use. HOA’s are given great power and it is up to each HOA how they exercise those powers. The only way that you can know what’s going on is to go to the meetings;  however,  HOA’s are also not subject to the Open Meetings laws, since they are not public entities, so check with other residents about how the HOA conducts its business.

Your home being a part of a site condo development isn’t necessarily a good or bad thing. It’s just something that you need to be aware of and find acceptable. Once you’ve purchased your “unit” within the site condo complex you’ll have to live with the rules of the HOA until you sell. 

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