For Neal Graham's Real Estate Class (LEGL 3485) at the University of Memphis. Copyright Cengage Learning.

1. Chapter 17
Condominiums and Cooperatives

2. Objectives
• After reading this chapter, you should be able
to:
– Understand the condominium form of property
ownership.
– Understand the cooperative form of property
ownership.
– Understand the time-sharing form of property
ownership.

3. Objectives
• After reading this chapter, you should be able
to:
– Understand the difference between the
condominium and the cooperative form of
ownership.
– Understand the requirements for condominium
declarations and condominium plats.
– Understand the content of the legal documents
required to create a condominium.

4. Condominium
• Condominium ownership
– Combination of individual and joint ownership
• Owner individually owns his or her unit
• Shares joint ownership of the common areas
– E.g., exterior walls of the buildings, stairwells, elevators,
walks, yards, roofs, entryways

5. Condominium
• Birth of a condominium
– Before a sale can begin, the developer is required
to prepare:
• A condominium declaration
– Also called master deed or master lease
• A plat showing the location of all individual and
common areas
• A condominium homeowners’ association

6. Condominium
• A condominium declaration generally includes
the following information:
– Name of the condominium
– Legal description of the entire property
– Description or delineation of the boundaries of
the individual units
– Description or delineation of all common areas

7. Condominium
• A condominium declaration generally includes
the following information:
– Creation of a governing body for the
condominium
– Limitations or restrictions on the power of the
condominium association
– Allocation of a share of liability for common area
expenses to each condominium unit

8. Condominium
• A condominium declaration generally includes
the following information:
– Statement of all restrictive covenants
– Description of how the condominium can be
expanded
– Statement of how the condominium form of
ownership can be terminated

9. Condominium
• Articles and bylaws of a condominium
association
– Name of the association
– Purpose of the association
– Duration of the corporation’s existence
– Initial directors of the corporation

10. Condominium
• Articles and bylaws of a condominium
association
– Registered agent and registered office of the
corporation
– Criteria for becoming an owner or member of the
association and the name of the incorporator

11. Condominium
• Condominium bylaws provide for:
– Selection of the board of directors
– How meetings are to be held and conducted
– How officers are to be appointed or elected
– How votes are to be counted in the governance of
the corporation
• Particularly, whether resolutions must be passed by a
simple majority or a three-fourths or two-thirds
majority

12. Condominium
• Condominium bylaws provide for:
– Regulation of the common elements
– Rights and responsibilities of unit owners
– Assessment and collection of monthly charges
– Other relevant matters

13. Condominium
• Until a developer turns over control, most
condominiums have two levels of membership
– Owner
– Developer
• Developer usually turns over control after the
sale of at least 75 percent of the condos

14. Condominium
• Expenses of the common areas are paid for by
the condo association
– Fees are contributed by each condo owner using
an assessment on each condo owner’s unit to
cover a pro-rata share of the common area
expenses
• Individual costs and expenses borne by
individual condo owners

15. Condominium
• Many states hold that an owner’s obligation
to pay the condominium association’s
assessment is unconditional
– Even if the association is not providing contracted
services
– Case
• Forest Villas Condominium Association, Inc. v. Camerio
et al. (Georgia, 1992)

16. Condominium
• Condominium owners have a joint and several
liability for damages or injuries that occur in
the common areas
– Liability insurance

17. Condominium
• Subcondominium
– Owner of a condo unit divides the unit into
separate subcondominium units
– Subcondominium property can only be created if
the master condominium declaration so provides

18. Checklist: Condominium
Fundamentals
• Determine if the developer or builder has a
good reputation
• Determine if the condominium
documentation complies with state law
• Carefully review the assessments while the
developer is still in control of the
condominium project

19. Checklist: Condominium
Fundamentals
• Determine who controls the board of
directors
• Review the restrictions on the use of the unit
and the common areas
• Determine if there is any control on the resale
of the property

20. Cooperative
• Usually found in urban areas along the East
Coast
• Differences between condominiums and
cooperatives
– Financing
• Main difference
• For a condo, each owner gets his or her own financing
• In co-ops, there is a blanket mortgage on the entire
property

21. Cooperative
• Differences between condominiums and
cooperatives
– In a cooperative, a corporation owns the land,
building, and all common areas
• Owner purchases stock in the corporation
– Provides long-term lease
– Co-op owners have more restricted rights of sale
• Must get approval of the co-op board

22. Time Shares
• Under a time-sharing arrangement, a person
purchases the right to use a home or
condominium at a resort area for a limited
period each year
– May be a cooperative, interval ownership, or
tenancy in common
• Purchaser has the right to rescission
– Usually five to seven days

23. Ethics: Paralegal Correspondence
• To the extent necessary to perform his or her
functions properly and to the extent that
these functions do not fall within the
definition of the practice of law, a paralegal
may correspond on law firm letterhead in the
paralegal’s own name

24. Ethics: Paralegal Correspondence
• Paralegal must clearly indicate his or her
status as paralegal
– Failure to do so might constitute representation
by the law firm that the paralegal is a member of
the state bar and authorized to practice law
within the state

25. Summary
• A condominium owner individually owns his
or her unit and, together with other individual
owners, has joint ownership and control over
the common property
• A cooperative owner has a lease on his or her
living unit and owns stock in a cooperative
corporation that owns the building in which
the unit is located

26. Summary
• Each state has a condominium act that
governs and regulates the creation,
governance, and regulation of the
condominium form of ownership
• Cooperatives are generally governed by a
board of directors of the corporation owning
the cooperative building