Second Quarter 2024
Now that the directors want to sell some common area properties to raise cash we have been hearing a lot of comments concerning ownership of the common areas. It’s been said that each member owns a piece of the HOA properties and/or have a vested interest in them. That applies to a Condominium Association (COA), not a Homeowners Association (HOA).
In Florida, these 2 types of residential Owners Associations function and are regulated in very different ways. Each one comes under the jurisdiction of a separate Chapter in the Florida Statutes - Chapter 718 for Condominium Associations and Chapter 720 for Homeowners Associations. Each Association must also follow its own Governing Documents and various other chapters, laws and codes.
It is interesting to note that Florida's Condominium Act (FS 718) uses the term common elements, while the Homeowners Association Act (FS 720) refers to common areas. This language difference is the basis for this article.
In Condominium Associations, each individual unit owner also owns an undivided share of the common elements.
In Homeowners Associations, the Associations’ corporation owns the common areas.
This distinction may not seem like much at first, though it directly influences:
– voting procedures
– Board of Directors authority
– how financial reserves are handled
– maintenance and repair responsibilities
– how changes can be made to the common areas
Condominium common elements are jointly owned by all the individual unit owners, so more oversight and protection are required in order to safeguard those owners' legal and financial interests.
In very basic terms, in a 100-unit condominium building each unit owner also owns a 1/100th share of all the common elements (areas). That share cannot be separated and sold separately. It is part of owning an individual unit and transfers to a new owner when that unit is sold, a fundamental element of ownership.
On the other hand, HOA communities, like this one, usually contain single-family homes and townhouses/villas, and individuals own their properties with no shared ownership of the common areas. This is the major difference between HOAs and COAs in Florida.
Since this HOA’s common areas are owned by the Association's corporation, individual owners are partially insulated from some of the legal and financial issues that could affect condo owners.
You might be thinking that if an HOA corporation owns the community's common areas, then the members get to vote on how those common areas are maintained, improved, and managed. Not exactly. You are members of the Association, not individual shareholders in the corporation that runs the community. By law, an HOA can’t issue stock.
Not all matters regarding COA or HOA common elements/areas are open to having the owners vote on them. Since a Board of Directors is elected to manage the Association's business, the Board is able to make most decisions without an owner vote, including selling common area properties. Note that in this HOA the directors are elected by each other. Not one of them was elected by the members.
Because individual HOA property owners do NOT jointly own the common areas, the Board of Directors has more authority to make decisions on its own regarding the maintenance, repair, upgrade, and additions to common areas that the corporation owns.
Since Condo owners DO jointly own the common areas, they have more input and voting rights on how common elements are managed and maintained, especially when it comes to spending Association money.
As a member you are responsible for all costs (maintenance, repair and etc.) of the properties but you have no ownership rights, only ‘use’ rights and the directors can take that right from you if they feel you’re not behaving properly. Every member of this HOA has the responsibility to understand how the Association is organized and how it should function within the laws governing it. You may need to use that knowledge as your first line of defense to protect yourself and your property someday.
Of all the ways to raise cash they chose to sell property. Would someone point out any other Florida HOA that has done this?