CID DEFINITIONS - CID TERMINOLOGY - INSURANCE TERMINOLOGY
WHAT DOES THAT TERM REALLY MEAN?
or, "WHEN IS A CONDOMINIUM REALLY A CONDOMINIUM?"
by Sara Barry PCAM CCAM CAM Paralegal
Former Community Association Management Company Owner
As Community Association Professionals, we often attend industry group lectures and seminars in order to enhance our skills and knowledge base. All too often, I personally walk away from these sessions wondering whether the individuals presenting this information to us are at all familiar with correct Community Association Industry terminology. The wide-spread use of misleading and incorrect terminology, as relates to the Community Association Industry, bewilders me.
Much of this terminology is basic to understanding the industry itself. Community Association professionals and related service industry professionals must learn and apply correct terminology when discussing or presenting topics relevant to the CA industry. If the professionals aren't clear, how can the members of the Boards and home owners understand the difference?
This issue becomes even more important as it relates to communication with legislators. If our legislators are as weak as they seem to be in their understanding of the Community Association Industry, how much better will it be if they don't learn the difference between a condominium, townhouse and single family detached dwellings and how different legislation affects each in different ways.
COMMON INDUSTRY TERMS
At the very basic level, we should all know and understand the meaning of Community Association, Planned Unit Developments (P.U.D.s) , Common Interest Developments (C.I.D.s), Condominiums, Townhomes and Single Family Detached Homes:
Community Association is the "family name" for all types of automatic membership associations created to manage and oversee jointly owned or shared property and property interests or owners within the "community."
Common Interest Development encompass four different types of developments in which exclusive rights of use or ownership are coupled with real property rights owned or enjoyed in common with others:
- Planned developments (P.U.D.S.),
- Community apartments, and
- Stock Cooperatives.
Condominium an undivided interest in Common in a portion of real property coupled with a separate interest in space called a "unit." Condominiums are typically a multi-unit structure (often similar to an apartment building in appearance and construction) where owners hold exclusive title to the space within the perimeter walls of their unit and shared-ownership to all other property. In layman terms, in a Condominium, the owner typically possesses title to a block of airspace and maybe the wall coverings or wall board inward. You have to look at the documents as condominiums can actually be in any form including what typically looks like a detached single family home.
Planned Unit Development is a development (other than a condominium, stock cooperative, or community apartment project) that has either or both of the following two features:
1. The Common Area is owned either by an association (typically the situation) or in common by the owners of the separate interests who possess appurtenance rights to the beneficial use and enjoyment of the Common Area.
2. A power exists in the association to enforce an obligation of an owner of a separate interest with respect to the beneficial use and enjoyment of the Common Area by means of an assessment which may become a lien upon the separately owned lot, parcel, or area. Typical examples of P.U.D.s are Townhouse, and Single Family Detached Home Developments. Developments can contain one or both of these types of homes.
Townhouse is akin to a group of single family detached homes attached to one another on one or two sides by a common wall. The unit owner "owns" title to the unit between the mid-points of the common walls, to the ground below and the air above. The Association usually has maintenance responsibility for the exterior "skin" of the Townhouses and typically owns only the Common Area outside of the individual lots.
Single Family Detached Homes are usually a part of a Planned Unit Development (P.U.D.) with all Common Areas owned by the Association. Typically, the Association only has maintenance responsibility for the Common Areas.
In layman terms, in a Townhouse or Single Family Detached Home, the owner typically possesses title to the land, building and airspace above. In a townhouse, exterior walls connecting adjacent units are shared and title only extends to the mid-point between the connecting walls.
Unfortunately, even written documents detailing the laws are commonly referred to as "Condominium Law." Published documents such as "Condominium Law Books" can also be misleading. Although the law included within these covers does AFFECT condominiums, it is not exclusive to condominiums. It is directed at the Community Association Industry as a whole, which is all inclusive. When knowledgeable directors or homeowners of townhouses or single family homes hear or see something that relates to "condominium" they often assume it doesn't apply to them as they know they don't live in a "condominium association". As this industry has evolved, so should "Condominium Law". It is no longer correctly named. A more fitting name would be "Community Association Law".
PROPERTY MANAGER vs COMMUNITY ASSOCIATION MANAGER
Although there are common exceptions to the following discussion of "Property Manager" verses "Community Association Manager", my discussion of the two is to show that there is a vast difference in the typical experience, training and certifications available to and/or required by these two very different professions. This difference should be well understood by Community Association Industry Professionals as well as Board Members. Quite frequently, however, I have found the term "Property Manager" used as a general term when discussing residential Community Association Management. This can be dangerous and is certainly misleading.
When soliciting a Manager for a Residential Community Association, letting an RFP for a "Property Manager" would be incorrect. The RFP should request bids from qualified and experienced "Community Association Management" firms. This would, of course include Property Management firms with experience in managing Residential Community Associations and managers on staff possessing the necessary licenses where appropriate, training, skills and certifications to effectively manage a Residential Community Association.
A "Property Manager" is not necessarily a qualified "Community Association Manager." Neither is a qualified "Community Association Manager" necessarily qualified to be a "Property Manager". Know the difference! Both come from a radically different school of thought and training. Each falls under different State, Federal and/or Local Laws.
Professionally Certified Community Association Managers
exclusively to work with Community Associations;
Certifications specific to Community Association management;
Actions governed by Community Association legislation;
Has no vested authority;
100 % responsible to Board of Directors for all actions;
Works under the direction of the Board of Directors;
Provides management consultation to Boards;
Cannot sign contracts or applications;
Must solicit bids;
Responsible for people and property management;
Should not rent or lease property unless they also meet State licensing requirements;
Should not be single signer on checks and cannot sign reserve checks;
Should maintain separate association checking accounts and not mix with own account.
Professional Codes of Ethics prohibit many of the above and more.
Permitted Property Managers
exclusively to deal with physical property management and maintenance;
Certifications specific to physical property management;
Actions governed by Real Estate legislation;
Can have significant decision authority and/or power of attorney;
Work purely against allocated expense budget;
Can sign contracts;
Often single signer on and issues checks;
Can maintain single "common" checking accounts;
Not necessarily required to solicit bids for work;
Responsible only to the building owner(s);
Can rent and lease property for others.
While the Community Association Management Industry is struggling to gain and present a professional identity to the public, regulatory agencies and legislative bodies, misrepresenting the Community Association Manager as a "Property Manager" is not only damaging to the cause, but can land the person in court if they donít have that license.
To illustrate my point, I'd like to site an example. Martha is the new president of her P.U.D., a 400 unit single family detached development. After 10 years of "self management", the Board has decided to seek the expertise of a professional to manage their association. Martha, who just used a local realtor to rent her townhouse across the valley, advises the Board that her agent's company also manages property. The Board, grateful that they don't have to search too far for help, asks Martha to get a proposal since they heard somewhere that homeowner associations are managed by property managers. In reality, if the Board accepts this proposal, this may be the only one of a handful of associations that this company has ever managed AND are not properly licensed through the State. The owner of the company has read quite a bit about "Condominium Management" in his industry journals and doesn't see it much different than managing a commercial apartment complex. In fact, it is quite different and require different licenses in many States.
When communicating within the Community Association Industry, consistency of terminology is critical. Lawyers, CPAs, Bankers, Reserve Study Specialists, Insurance Industry Representatives and other professionals communicating to Boards, homeowners, and other industry professionals within this industry must learn to use correct terminology. Confusion and misunderstanding can and will arise when these terms are crossed and misrepresented.
All of us in the Community Association Industry must help others correctly understand the industry by being consistent in the use of correct terminology. The industry as a whole will benefit from it and all of us working hard to bring about a sense of unity within the industry will at least have one less issue to deal with.
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