What are the differences between HOAs and Condominiums Associations?
March 25, 2013
There are two types of associations in Tennessee, homeowners associations and condominium associations. While there are many similarities between the two, there are important differences. These differences impact how the association act and what they can and cannot do.
The major difference between homeowners associations and condominiums associations revolves around the type of real property development administered by the association. A homeowners association governs a single-family, planned development made up of lots. Each lot is improved with a separate home. Traditionally, these developments are your typical suburban neighborhood with stand-alone homes, each with a yard. A condominium association governs a common structure(s) comprised of multiple units. Each unit is a legally defined three-dimensional volume that shares walls and utilities with other units. It is possible to have a hybrid development of the two, typically in older townhouse developments.
A homeowners association is governed by a document usually entitled a “Declaration of Covenants, Conditions, and Restrictions” (“CCRs”). The CCRs are recorded in the Register’s Office in the county in which the development in located. Consequently, the CCRs are of public record. In Shelby County, these documents are easily accessible and searchable online at: http://register.shelby.tn.us. The CCRs set out what limitations, covenants, and assessments apply to the property. The property is legally defined in the CCRs. Generally, the charter and bylaws of the association are attached to the CCRs as exhibits. The association governs the development, in accordance with the provisions of its bylaws and charter, pursuant to the CCRs. While corporate matters would be resolved by the Tennessee Nonprofit Corporation Act, Tenn. Code § 48-51-101, et seq. (the “Nonprofit Corporation Act”), there is currently no statutory framework or law in Tennessee for homeowners associations regarding their relationship to real property matters and assessments. Thus, the documents for each individual association are extremely important as they set forth the powers of the association and the covenants encumbering the property.
Condominium associations are different developments. There are two statutes that apply to condominium developments in Tennessee. The Tennessee Horizontal Property Act, Tenn. Code § 66-27-101, et seq. (the “Horizontal Property Act”), applies to all condominium developments completed prior to January 1, 2009. The Tennessee Condominium Act of 2008, Tenn. Code § 66-27-201, et seq. (the “Condominium Act”), applies to all condominium developments completed after January 1, 2009, and in parts to all condominium developments in Tennessee as to matters that arise after January 1, 2009. A condominium association is governed by a document entitled either a “Master Deed” or a “Declaration” dependent upon whether the condominium was developed under either the Horizontal Property Act or the Condominium Act. Like CCRs, a Master Deed or Declaration is recorded in the Register’s Office in the county in which the development in located and sets forth limitations, covenants, and assessment apply to the property. In addition, the Master Deed or Declaration also legally creates real property. This is an important distinction between a Master Deed or Declaration on one hand and CCRs on the other. CCRs do not create transferable real property. Master Deeds and Declarations do. As stated above, a condominium development is a collection of three-dimensional volumes, each defined as units, which share certain common walls and utilities. The Master Deed or Declaration is the document that defines these units. Thus, when a unit is conveyed, reference is made the Master Deed or Declaration as it is the only document which fully describes that unit. In other words, but for the Master Deed or Declaration the unit would not exist. Consequently, the Master Deed or Declaration is of primary importance to unit owners in a condominium development because it creates and defines their property. Like a homeowners association, the bylaws and charter for the association is likely attached to the Master Deed or Declaration as an exhibit. Outside of the Horizontal Property Act and the Condominium Act, the Nonprofit Corporation Act applies to corporate matters involving the association. Even though there is a statutory framework for condominium associations, the Master Deed or Declaration for each individual is of critical importance.
While this post sets out the main difference between homeowners associations and condominium association in broad strokes, in the next post we will address homeowners associations in more detail.
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