What To Know About Condo Associations: Your Guide To Rules, Fees And Insurance

If you’ve considered buying a condominium, you may already be familiar with some of the perks of condo living. Sure, you have to pay monthly or annual fees, but you also get access to a swimming pool that you’re not personally responsible for cleaning and maintaining.

More importantly, you own and are responsible for the interior of your condo unit – typically from the drywall inward and the floorboards upward – while a group of people who make up what’s known as a condo association manages the rest of the property and complex.

But what exactly are condo associations, and how do they work? Let’s explore these community associations – including their rules and fees – in more detail.

A condo association is a governing board composed of all the residents who own units within the building, complex, neighborhood or other planned development. The association may have an elected board of directors representing it, and sometimes the condo association board hires a property management company to oversee the daily operation of the planned community.

While daily operations may look different from complex to complex, a condo association’s general responsibilities include:

• Making sure all rules, policies and bylaws are followed
  
  
• Collecting monthly, quarterly and special assessment fees from each condo owner
  
  
• Deciding how these fees will be allocated for insurance, emergencies, overall maintenance and other expenses

Condo Association Vs. HOA

While a condo association and a homeowners association (HOA) are similar in purpose, the main difference between the two governing bodies pertains to what their respective owners actually own. See the breakdown below.

• Condominium association: In a condo association, each condo owner is a member of the association and they’re the sole owner of their individual unit’s interior. Each condo owner also has joint ownership of shared areas. These include lobbies, parking garages and amenities such as swimming pools, fitness facilities, tennis courts and dog parks.
  
  
• Homeowners association: Similar to a condo association, each member owns their individual property, which includes their home and the real estate on which the home resides. However, the individual members don’t share joint ownership of common areas. Instead, the homeowners association (HOA) – which usually exists as an independent entity or is owned by the developer or an HOA management company – owns these shared areas.

With the exception of ownership, a condo association operates similar to an HOA. Both are community associations charged with establishing a set of rules and regulations that govern how residents can live within the community, and both collect fees to fund basic operating expenses.

Let’s take a closer look at what a condo association does and how one operates.

Condo Association Rules

When you purchase a condo, you enter into a restrictive covenant with the condo association. This means that you agree to abide by the association’s declarations, rules, bylaws and amendments.

A condo association’s primary set of rules can be found in a governing document known as the Declaration of Covenants, Conditions and Restrictions (CC&Rs). The primary goal of the CC&Rs is to establish guidelines for how you can use the building or complex, including the common areas and – in some cases – your individual condominium.

While the specific CC&Rs can vary between buildings or complexes, most include rules for acceptable behavior in the common areas. Many of these rules are obvious – for example, you won’t be allowed to destroy, damage or vandalize any part of the complex, including its exterior and common elements.

But you may also need to be sure not to block any entryways or walkways – including the sidewalk in front of your detached condo or the hallway of your unit’s floor – with furniture, boxes, a bicycle, trash cans or other obstructions. And you may not be able to grill out except in designated spaces.

Some other areas the CC&Rs may cover include:

• Noise: Your condo association will probably have specific rules prohibiting you from engaging in activities in your unit or the common areas that would be considered intrusively loud to other residents.
  
  
• Pets: Your condo association may not allow pets. If it does, you may be limited in the type of pets you can have, how many pets you can have, and the common areas that pets are allowed in. Most likely, you’ll need to have your dog – or cat – on a leash when in those common areas, and you’ll probably be required to keep your pets up to date on their vaccinations.
  
  
• Garbage disposal: If your detached condo is in a neighborhood with curbside pickup, you’ll most likely be required to store your trash and recycling in acceptable bins. You’ll probably also be expected not to leave the bins on the street after garbage day. If you reside in a high-rise or other condo building, you may be forced to dispose of your garbage in the garbage chute or the dumpster assigned to your building.
  
  
• Your condo unit: Obviously, you can’t renovate the common area to suit your personal tastes and design aesthetic. But you may also need the condo association’s permission before you can remodel your kitchen or bathroom or transform your individual unit into an open floor plan. Your home improvement or renovation project must be approved by the association board members so they’ll know you aren’t knocking down any load-bearing walls or otherwise jeopardizing the structural or architectural integrity of the unit.

All this may seem like too much oversight of your personal property. But the condo association is a legal entity, and its board of directors has the power to enforce its rules and regulations – as well as impose fines for violations – as long as those CC&Rs don’t violate federal or state laws.

Ultimately, one of the main purposes of a condo association is ensuring your safety and convenience – as well as the safety and convenience of the other unit owners and residents in your complex or building. Another objective is maintaining property values so the community continues to be a good investment.

Condo Association Fees And Other Costs

Similar to an HOA, your condo association will collect regular dues from you and other association members to cover basic operating expenses. How much you pay in monthly, quarterly or annual fees – also known as common charges – will depend on the location and size of your condominium complex and the amenities your association offers.

In addition to common charges, your association may occasionally need to collect a one-time fee, or special assessment, for unexpected costs.

Let’s look at three places where your condo association fees will go:

• An operating fund: The money from common charges is funneled into an operating fund for the general upkeep of the building or complex, including its shared areas and common elements, such as sidewalks, elevators and perhaps fitness equipment. Common charges also cover general repairs to the exterior of your unit’s building or – if your condo is detached – your single-family home or townhome.
  
  
• A reserve fund: In addition to landscaping and clubhouse maintenance, the fees the association collects from you and other condo owners will contribute to a reserve fund. This fund acts as a sort of savings account for unplanned expenses and necessary upgrades. The condo association uses a percentage of your common charges to maintain the reserve fund and replenish it when necessary.
  
  
• A special assessment: This one-time fee is usually required when a natural disaster or other emergency creates a need for an urgent repair that exceeds the association’s annual budget. A special assessment can also be collected if a community project – such as repaving a neighborhood road or resurfacing the tennis courts – runs over budget. Usually, the association must vote to approve a special assessment. Either way, you’ll be required by the CC&R to pay the special assessment, which can cost hundreds – and sometimes thousands – of dollars, creating the need for everyone to chip in.

Similar to enforcing its CC&Rs, a condo association has the legal authority to place a lien or encumbrance on condo units and even initiate foreclosure proceedings if a condo owner defaults on paying their fees.

Condo Association Insurance

In addition to covering general upkeep and operating expenses, your condo association fees pay for the condo association insurance policy. The condo association insurance policy covers damages to exterior areas of the building or complex, including the basement, roof, parking structure and elevator, or amenities such as the clubhouse, community pool or gym.

The condo association insurance policy also provides liability protection by covering legal or medical costs if a resident or guest slips, falls or suffers an injury in a common area of the complex and then sues for compensation.

It’s important, however, not to confuse condo association insurance with individual condo insurance. While the condo association insurance policy covers the areas outside of your home, you’ll still be responsible for the maintenance and repair of your condo’s interior. As such, you’ll want to consider an individual condo insurance policy, which operates similar to homeowners insurance.

If you purchase a condominium, you’re automatically included in the community’s governing body known as the condo association. This means you’ll have a voice in how the condo association operates, but it also means you’ll pay association fees and be held accountable to the association’s Covenants, Conditions and Restrictions.

Just remember that the main purpose of the condo association is upkeep of the condo building or complex. This helps ensure safety and convenience for you and other unit owners, but it also helps preserve property values so that joining the community remains a good financial investment.

Are you thinking about buying a condo? Start a mortgage application to see how much of a loan you’ll qualify for.