Associations are a common way to own land in Lakes Country for a couple different reasons. Probably the most common example is to address senior living arrangements where owners want to still own their own home but avoid lawn maintenance and other headaches of single family home ownership. The other common example is shared ownership along lakeshore as it is so expensive to own your own lake house. This type of ownership can be a great choice but here are some possible pitfalls I have seen over the years:
Budget. Make sure you understand the budget before purchasing your unit. People always ask what the monthly maintenance fee is but few really know what that covers. Some associations are adequately funded and have reserve accounts for future maintenance. Most, however, bill the absolute minimum and have no plan for when new parking lots, roofs, docks or other improvements need replacement. You might find a large special assessment will be needed to cover these items not long after you move in. Another common problem is how the association is structured. If there are only 8 Units and the Association maintains a private road, the yards and maybe even a common well/septic, there simply might not be enough members to afford replacement when that time comes. The assessment might have to be quite large and it’s foolish to think every owner will pay their fair share in a timely manner.
Amenities. Many associations have docks, garages, boat lifts or other improvements that are owned by the Association but assigned to individual Unit owners. In many cases, there are not enough docks or garage units to serve all owners. If this is a lake association, rights to a dock and boat slip might be a large percentage of the overall value of your Unit. As a result, make sure the amenities you want are vested with your Unit. Many associations simply have unwritten procedures or rules that explain who has dock privileges, for example, and they often allow the Board to delegate future rights if you sell your Unit based on some waiting list or other criteria. You want to make sure that you can use the dock for as long as you own the Unit and then upon sale you can sell your Unit with this same vested right.
Maintenance. The Declaration of Covenants is the legal documents that is recorded to put future owners on notice of the rights and obligations of the Association and individual Unit owners. That document is often lengthy and hard to understand. In my experience, boards often don’t even understand how to administer the rules which makes it hard for buyers to know what they are getting in to. Try to understand the written rules and then compare that with how the board is actually running the association. Does the budget really cover the expenses the association is supposed to provide? Is the association actually providing the lawn care, snow removal or other services promised in the Declaration?
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