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Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
Rockwell publishing real estate law chapter 16
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Rockwell publishing real estate law chapter 16

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  • 1. Printable Lesson Materials Print these materials as a study guide These printable materials allow you to study away from your computer, which many students find beneficial. These materials consist of two parts: graphic summaries of the content and a multiple choice quiz. Graphic Summaries This portion of your printable materials consists of dozens of frames that summarize the content in this lesson. The frames are arranged on the page to make it easy for you to study the material and add your own notes from your textbook or the online course. Quizzes Many students learn best from sets of questions, and this multiple choice quiz allows you to focus your review of the material to important topics. 13218 NE 20th Street Bellevue, WA 98005 425-747-7272 800-221-9347 www.rockwellinstitute.com© 2009 Rockwell Institute
  • 2. California Real Estate Law Lesson 16: Common Interest Developments © Copyright 2007 Rockwell Publishing, Inc.IntroductionThis lesson will discuss: l types of common interest developments l subdivision laws l homeowners associations © Copyright 2007 Rockwell Publishing, Inc.Common Interest DevelopmentsTypes of CIDsStandard subdivision: typically a group of traditionalhomes built more or less simultaneously by a singledeveloper l dates back to 1950s and 1960s l owners governed by set of rules l owners don’t share any interest in subdivision property © Copyright 2007 Rockwell Publishing, Inc. 1
  • 3. Common Interest DevelopmentsTypes of CIDsChanges to subdivisions since 1970s: l smaller families l increasing land costsNow common interest developments are morecommon. © Copyright 2007 Rockwell Publishing, Inc.Common Interest DevelopmentsTypes of CIDsCommon interest development (CID): subdivision inwhich homeowners share title to at least someaspects of the property, such as parking lots, golfcourses, parks, etc. l homes usually built closer together l more surrounding open space l shared property known as common elements © Copyright 2007 Rockwell Publishing, Inc.Common Interest DevelopmentsTypes of CIDsFour main types of common interest developments: l condominiums l planned developments l community apartments l cooperativesMost common interest developments are eithercondominiums or planned developments. © Copyright 2007 Rockwell Publishing, Inc. 2
  • 4. Types of CIDsCondos and planned developmentsCondominium: l owner has title to unit from the walls in l shares ownership of land beneath building l shares ownership of common elements © Copyright 2007 Rockwell Publishing, Inc.Types of CIDsCondos and planned developmentsPlanned development: l owner has title to individual home l owner has title to land beneath building l shares ownership of common elements only l more like standard subdivision l also known as planned unit development or PUD © Copyright 2007 Rockwell Publishing, Inc.Condos and Planned DevelopmentsTownhousesUnits in condominium or planned development cantake form of townhouses.Townhouse: multi-story homes that share commonwalls with other units (like condominium) but haveprivate yard area (like homes in PUDs) © Copyright 2007 Rockwell Publishing, Inc. 3
  • 5. Condos and Planned DevelopmentsTownhousesWhen townhouse development is created ascondominium: l private yard area is classified as limited common areaLimited common area: owned by all owners indevelopment as tenants in common, but possessoryrights assigned to individual owners © Copyright 2007 Rockwell Publishing, Inc.Condos and Planned DevelopmentsTownhousesWhen townhouse development created as planneddevelopment: l private yard area owned separately (as with regular houses) © Copyright 2007 Rockwell Publishing, Inc.Types of CIDsCommunity apartments and cooperativesTwo less common forms of CIDs: l community apartment l cooperative © Copyright 2007 Rockwell Publishing, Inc. 4
  • 6. Types of CIDsCommunity apartments and cooperativesCommunity apartment: all owners own entiredevelopment as tenants in commonEach owner receives: l deed for undivided partial interest in development l lease to individual unit or lot © Copyright 2007 Rockwell Publishing, Inc.Types of CIDsCommunity apartments and cooperativesMost original community apartments have sincebeen converted to condominiums. l mobile home parks still often organized as community apartments © Copyright 2007 Rockwell Publishing, Inc.Types of CIDsCommunity apartments and cooperativesCooperative: residents don’t receive deedsEach resident: l owns stock in corporation that holds title to entire development l receives lease for individual unitCo-ops are more common on East Coast. © Copyright 2007 Rockwell Publishing, Inc. 5
  • 7. SummaryTypes of CIDs l Common interest development l Common element l Condominium l PUD l Limited common area l Community apartment l Cooperative © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsFour statutes affect the subdivision and sale of realproperty in California: l Subdivision Map Act l Subdivided Lands Law l Vacation Ownership and Timeshare Act of 2004 l Interstate Land Sales Full Disclosure Act © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsSubdivision Map ActSubdivision Map Act: originally passed in 1907, tohelp standardize subdivision procedures and tokeep track of titles to lots l requires developers to create and record detailed plans or maps of their subdivisions © Copyright 2007 Rockwell Publishing, Inc. 6
  • 8. Subdivision LawsSubdivision Map ActSubdivision maps show: l lot lines l roads l grading l utility easements l etc. © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsSubdivision Map ActSubdivision Map Act later amended to addressproblems caused by population growth.Requires developers to: l conform subdivisions to city or county land- use goals l pay fees for use of public services l prepare environmental impact reports © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsSubdivision Map ActSubdivision Map Act is state law, enforced by localgovernments.City and county agencies: l must review subdivision maps l may require developers to change plans © Copyright 2007 Rockwell Publishing, Inc. 7
  • 9. Subdivision LawsSubdivision Map ActDeveloper may not enter into any binding purchaseagreement with buyers until: l required map is filed l local agency requirements are met © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsSubdivision Map ActIf property is sold but no map is recorded: l buyer has one year to void purchase l developer may be subject to criminal penalties © Copyright 2007 Rockwell Publishing, Inc.Subdivision Map ActApplication of the Map ActSubdivision Map Act applies to every subdivision ofa parcel of property. l even subdivision of one parcel into two parcelsParcel: under Subdivision Map Act, includescondominium projectsHowever, some Map Act provisions only applywhen land is divided into five or more lots. © Copyright 2007 Rockwell Publishing, Inc. 8
  • 10. Subdivision Map ActMap approval processFirst step in approval process is filing tentative map.Tentative map: draft of final map that developer willeventually recordLocal agency charged with evaluating subdivisionmaps circulates tentative map to other city or countydepartments. © Copyright 2007 Rockwell Publishing, Inc.Subdivision Map ActMap approval processCity and county departments consider: l flood control l utility supply l public amenities l impact on schools l traffic demandsDepartments make reports to planning department. © Copyright 2007 Rockwell Publishing, Inc.Subdivision Map ActMap approval processBased on reports, planning department accepts orrejects tentative map.Usually department grants developer qualifiedacceptance: acceptance with conditions attachedExample: Qualified acceptance may containcondition that developer dedicate more land to openspace. © Copyright 2007 Rockwell Publishing, Inc. 9
  • 11. Subdivision Map ActMap approval processGetting tentative map approved may take years. l Developer must satisfy all imposed conditions before filing final map. © Copyright 2007 Rockwell Publishing, Inc.Subdivision Map ActMap approval processOnce tentative map is recorded, developer maysign conditional purchase agreements. l not binding on purchasers until final map filedTentative map usually expires within 24 – 36months, although developers may seek extensions. l if map expires ? must start process over © Copyright 2007 Rockwell Publishing, Inc.Subdivision Map ActMap approval processProperty owners who are subdividing a parcel intoless than 5 lots just need to file a parcel map. l simplified process l fewer conditions © Copyright 2007 Rockwell Publishing, Inc. 10
  • 12. Subdivision Map ActCondominium conversionsDevelopers who want to convert apartments tocondominiums must: l file a subdivision map l give tenants 180 days’ notice that tenancy is terminating l give tenants at least 90 days following notice before unit put on market l give tenants exclusive right for 90 days following notice to buy unit on same or more favorable terms than will be offered to public © Copyright 2007 Rockwell Publishing, Inc.SummarySubdivision Map Act l Subdivision Map Act l Parcel l Tentative map l Final map l Parcel map l Condominium conversions © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsSubdivided Lands LawSubdivided Lands Law : requires sellers ofsubdivided parcels or interests to make detaileddisclosures to potential buyers l enacted in 1943 l applies to sales, financing, and leases l applies to subdivisions containing at least 5 lots © Copyright 2007 Rockwell Publishing, Inc. 11
  • 13. Subdivision LawsSubdivided Lands LawIf subdivision project is covered by SubdividedLands Law: l developer must obtain public report from Department of Real Estate (DRE) l before offering any lot or unit for sale or lease © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsSubdivided Lands LawTo obtain public report, developer files applicationcontaining: l notice of intent l completed questionnaire with information regarding project l attached documentation © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsSubdivided Lands LawReal Estate Commissioner reviews application. l checks for misrepresentations l looks for evidence that buyers get what they pay for © Copyright 2007 Rockwell Publishing, Inc. 12
  • 14. Subdivision LawsSubdivided Lands LawDeveloper must demonstrate: l reliable procedure for removing blanket construction liens l trust account in place for buyer’s depositsIf application approved, public report issued. © Copyright 2007 Rockwell Publishing, Inc.Subdivided Lands LawPublic reportsPublic report contains developer disclosures, tohelp consumers make informed decisions.Disclosures include descriptions of any: l taxes and assessments l private restrictions l unusual charges to buyers l hazards or environmental issues l potentially harmful financing terms © Copyright 2007 Rockwell Publishing, Inc.Subdivided Lands LawPublic reportsSubdivided Lands Law prohibits arranging sale ofsubdivision property before Commissioner hasissued either: l preliminary report l conditional report l final report © Copyright 2007 Rockwell Publishing, Inc. 13
  • 15. Public ReportsPreliminary reportPreliminary report: l allows developer to take buyer “reservations” l frequently referred to as “pink report” l buyer can back out of reservation l developers can use for one year l contains initial versions of disclosures that will be contained in final report © Copyright 2007 Rockwell Publishing, Inc.Public ReportsConditional reportConditional report: l allows developer to enter into conditional sales contracts l developer must prove project will be completed as promised l developer must prove that buyers’ deposits will be handled correctly © Copyright 2007 Rockwell Publishing, Inc.Public ReportsConditional reportConditional sales contracts: l binding only for certain time (6 – 30 months) l during that period, developer must obtain final report © Copyright 2007 Rockwell Publishing, Inc. 14
  • 16. Public ReportsFinal reportFinal report: l issued when Commissioner determines project meets requirements of Subdivided Lands Law l once distributed to buyer and map recorded, home sales can be finalized l prospective buyers must receive copy before signing purchase agreement l seller needs to keep copy for at least 3 years l valid for 5 years © Copyright 2007 Rockwell Publishing, Inc.Public ReportsFinal reportNew report needed if subdivision undergoesmaterial change.Material changes include: l addition of new streets l alteration of lot sizes l restructuring of sales (financing or method of conveyance) l buyer taking title to five or more lots © Copyright 2007 Rockwell Publishing, Inc.Subdivided Lands LawPublic report not requiredPublic report not required if l size or type of subdivision exempt l resale of property © Copyright 2007 Rockwell Publishing, Inc. 15
  • 17. Public Report Not RequiredExemptions for size or typeSubdivided Lands Law doesn’t apply to: l developments involving fewer than 5 lots l subdivisions with big lots (160 acres or larger) l commercial subdivisions © Copyright 2007 Rockwell Publishing, Inc.Public Report Not RequiredResale of propertiesWhen private homeowner sells subdivisionproperty: l no public report required l but similar content required on transfer disclosure statement © Copyright 2007 Rockwell Publishing, Inc.Subdivided Lands LawOut-of-state subdivision salesIf subdivision is located outside California, butdeveloper is marketing project in California: l no public report required l but developer must obtain permits from Real Estate Commissioner l permit process and disclosures similar to public report © Copyright 2007 Rockwell Publishing, Inc. 16
  • 18. SummarySubdivided Lands Law l Subdivided Lands Law l Public report l Preliminary report l Conditional report l Final report l Material changes © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsVacation Ownership and Timeshare ActTimeshare: buyer purchases right to occupyproperty (usually condo in vacation area) for one ormore periods every yearTimeshares: l used to be treated as subdivisions l complaints led to Vacation Ownership and Timeshare Act of 2004 © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsVacation Ownership and Timeshare ActAct requires: l disclosures about property l seven-day right of rescission for buyers l notice of buyer’s rescission right on purchase agreement © Copyright 2007 Rockwell Publishing, Inc. 17
  • 19. SummaryVacation Ownership and Timeshare Act l Timeshare l Vacation Ownership and Timeshare Act © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsInterstate Land Sales Full Disclosure ActInterstate Land Sales Full Disclosure Act (ILSFDA):applies to interstate sale and advertising ofunimproved residential lots in medium- or larger-sized subdivisions (at least 25 lots) l intended to prevent fraud and deceptive practices l enforced by Department of Housing and Urban Development (HUD) © Copyright 2007 Rockwell Publishing, Inc.Subdivision LawsInterstate Land Sales Full Disclosure ActIf development is covered by ILSFDA: l must be registered with HUD l developer must prepare property report © Copyright 2007 Rockwell Publishing, Inc. 18
  • 20. Subdivision LawsInterstate Land Sales Full Disclosure ActProperty report contains disclosures about project. l buyer must get copy before signing sales agreement l buyer has 7 days to withdraw from sale after receiving disclosure © Copyright 2007 Rockwell Publishing, Inc.SummaryInterstate Land Sales Full Disclosure Act l Interstate Land Sales Full Disclosure Act l Property report © Copyright 2007 Rockwell Publishing, Inc.Homeowners AssociationsDavis-Stirling Common Interest Development Act:requires every common interest development (CID)in California to have homeowners associationHomeowners association: manages the subdivisionand handles disputes between neighbors; creationand operation governed by Davis-Stirling Act © Copyright 2007 Rockwell Publishing, Inc. 19
  • 21. Homeowners AssociationsAssociation membershipEvery homeowner in CID automatically becomesmember of CID’s homeowners association. l association must hold regular meetings l members vote on issues l one vote per unit © Copyright 2007 Rockwell Publishing, Inc.Homeowners AssociationsAssociation membershipHomeowners association is responsible formaintenance, repair, improvements of CID’scommon areas and structures. l funds raised through member assessments © Copyright 2007 Rockwell Publishing, Inc.Association MembershipAssessmentsHomeowner dues: regular fees levied on members,(usually on monthly basis) to cover routineexpenses such as maintenance of hallways,grounds, and other common elements © Copyright 2007 Rockwell Publishing, Inc. 20
  • 22. Association MembershipAssessmentsSpecial assessments: levied on members for majorrepairs to roofs, sewers, and other commonelements; or improvements, such as tennis court orplayground © Copyright 2007 Rockwell Publishing, Inc.Association MembershipAssessmentsAssociation may impose additional fees onindividual owners for certain services. l example: conveyance fee l fees can’t exceed actual cost of task (example: making copies of governing documents for potential buyer) © Copyright 2007 Rockwell Publishing, Inc.Homeowners AssociationsBoard of directorsBoard of directors: elected from within homeownersassociation members l makes most management decisions l holds regular public meetings l holds some closed sessions to handle private matters © Copyright 2007 Rockwell Publishing, Inc. 21
  • 23. Homeowners AssociationsGoverning documentsHomeowners Associations governed by set ofdocuments that includes: l declaration (recorded document containing rules of subdivision) l articles of incorporation l bylaws © Copyright 2007 Rockwell Publishing, Inc.Governing DocumentsRecordkeeping and inspection rightsAssociation must: l keep minutes of all meetings (both board and general) l maintain financial books and other records © Copyright 2007 Rockwell Publishing, Inc.Governing DocumentsRecordkeeping and inspection rightsAll members have right to inspect these records. l exception: board’s executive session minutes © Copyright 2007 Rockwell Publishing, Inc. 22
  • 24. SummaryHomeowners Associations l Homeowner dues l Special assessments l Board of directors l Governing documents © Copyright 2007 Rockwell Publishing, Inc. 23
  • 25. Legal Aspects of Real Estate Lesson 16 Cumulative Quiz1. Common elements in a subdivision would most likely include: A. airspace of a condominium unit B. a mobile home C. individual lots in a planned development D. parking lots2. Many mobile home parks are set up as: A. community apartments B. condominiums C. cooperatives D. townhouses3. Which of the following laws related to subdivisions is a federal law? A. Interstate Land Sales Full Disclosure Act B. Subdivided Lands Law C. Subdivision Map Act D. Vacation Ownership and Timeshare Act4. If a subdivision has fewer than five lots, the developer only needs to file a: A. conditional map B. final map C. parcel map D. tentative map5. Townhouses may be set up as either: A. cooperatives or timeshares B. condominiums or planned developments C. community apartments or cooperatives D. planned developments or community apartments6. Amy owns shares of stock in the corporation that holds title to the building she lives in, and she has along-term lease on her unit. Amy lives in a: A. community apartment complex (CAC) B. condominium C. cooperative D. planned unit development (PUD)© 2009 Rockwell Publishing 1
  • 26. 7. What law applies to the subdivision of any parcel of property in California? A. Interstate Land Sales Full Disclosure Act B. Subdivided Lands Law C. Subdivision Map Act D. Vacation Ownership and Timeshare Act8. Which of the following is one of the governing documents of a homeowners association? A. Declaration B. Final map C. Public report D. Transfer disclosure statement9. Which kind of report is valid for five years under the Subdivided Lands Law unless the subdivisionundergoes material changes? A. Conditional report B. Final report C. Preliminary report D. Tentative report10. A homeowners association is required for which types of subdivision? A. Community apartment B. Condominium C. Planned development D. All of the above11. Which of the following is covered by the Subdivided Lands Law? A. An industrial park B. Resale of a property in a subdivision by a private owner C. A subdivision of five half-acre lots D. Sale to California residents of a subdivided property located outside of California12. An owner in a subdivision receives a deed for an undivided partial interest in the entire developmentas a tenant in common. This describes a: A. community apartment B. condominium C. cooperative D. planned development© 2009 Rockwell Publishing 2
  • 27. 13. A developer may not advertise that a subdivision will include a swimming pool when it isnt availablefor use, unless: A. completion is assured through bonding B. the buyer has put down a deposit C. the buyer acknowledges receipt of a conditional report D. a tentative map has been accepted14. The records of a homeowners association must be available for inspection by: A. adjacent property owners B. all members of the association C. the board of directors only D. other subdivision developers15. A homeowners association may impose which of the following fees? A. Association dues B. Special assessments for roof repairs C. Conveyance fees D. All of the above16. Which of the following does a condominium owner have exclusive ownership over, not as a commonelement? A. Walls between her unit and her neighbors B. A reserved parking space C. The enclosed space within her unit D. The roof over her unit17. A subdivision map must include: A. private restrictions that will apply to the subdivision B. utility easements C. taxes and assessments on the property D. prices of individual lots18. A developer converting an apartment building into a condominium must give tenants: A. 30 days notice B. 180 days notice and an exclusive right to buy on the terms that will be offered the public C. financial assistance in obtaining a new residence D. the right to extend their lease after conversion© 2009 Rockwell Publishing 3
  • 28. 19. Buyers have a seven-day right of rescission when they agree to purchase a/an: A. condominium B. mobile home C. timeshare D. townhouse20. At a homeowners association meeting, when an issue is put to a vote the owner of each unit gets: A. one vote B. one vote for each resident of the unit C. a number of votes equal to the number of years he has owned the unit D. a number of votes based on his share of association dues© 2009 Rockwell Publishing 4

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