A Brief History of HOAs: Part III

In previous installments of this series we examined the origins of the modern homeowners association beginning with the publication of Ebenezer Howard’s 1902 book, Garden Cities of To-morrow and continuing through 2010 at which time an industry sponsored exit poll concluded that the number of HOAs in the United States was approximately 305,000. This total includes both traditional subdivisions in which single-family homes are located on individually platted lots as well as a variety of attached housing schemes ranging from condominiums to townhouses, row homes and garden homes, some of which are platted as condominiums and some of which are organized as planned developments or PUDs.

All developments which share the use and responsibility for various commonly owned improvements are collectively known as common interest developments (CIDs) due to the shared  ownership aspect of these development. To manage the commonly owned improvements the developer creates a homeowners association after hiring an attorney to draft a document known as the Covenants, Conditions & Restrictions (CC&Rs).

The CC&Rs are a legally binding document that amounts to a contract between the property owners who purchase homes within the development and the HOA that has been created to manage the common areas and enforce the rules set forth in the CC&Rs. This “contract,” although not a contract in the strict legal sense, is a binding agreement that adheres to the property and is therefore passed from one owner to the next each time the title to the property changes hands.

In the United States there are two primary types of land development schemes that result in the property within the development being subject to CC&Rs; condominiums and planned developments or more correctly, planned unit developments (PUDs). PUDs are typical of what most people would call a subdivision; a term which is derived from the practice of dividing a large parcel of land into smaller parcels, each with its own legal description and deed. Whereas you once had a 100 acre parcel of land owned by farmer Jones, after it is subdivided you may have a residential or mixed-use development consisting of 100 or more individual lots that may then be sold separately.

Not all subdivision are PUDs however, so the question is, what makes a property a PUD verses just another subdivision? And the answer is those CC&Rs which are drawn up by the developer and recorded with the deeds to the newly created lots within the subdivision. This process of drafting the CC&Rs and organizing the development under the umbrella of an HOA are part of the “planning” process which in turn leads to the name planned unit development.

What is often not mentioned in the discussion of planned developments or condominiums is that this “planning” process – specifically the impact of the CC&Rs on the property owners – amounts to a form of privatized government and while this “government” does not have the authority to incarcerate or physically detain you, in many other respects it is very similar to a local municipal government such as a city or county.

The practice of dividing up large pieces of land into smaller parcels is not new. The earliest settlers in the New World were known to have engaged in this practice. Under an edict from one of a handful of European monarchs who had taken it upon themselves to issue land grants to prominent members of the New World colonies, the leaders of these settlements would often divide the land that had been “granted” to them and either sell it or give it to the commoners, typically in exchange for a percentage of the crops grown on the land. The ability to survey and divide land was a highly useful and profitable skill in the New World. So much so that many of the nation’s forefathers are known to have listed among their resume of skills that of a land surveyor.

Condominiums on the other hand are a much more recent phenomenon, dating back to perhaps the 18th century in Europe. The idea did not begin to gain traction in the United States until the 1950s when the first condominium statutes were enacted in, of all places Puerto Rico, which adopted The Horizontal Property Act in 1958. When most people think of a condominium they probably picture an apartment-like dwelling in a sunny region such as south Florida or Phoenix where aunt Harriet and uncle George retired to a life of leisure and bad golf after many years of slaving away at the salt mines in some rust-belt city.

In the context of 21st century America however, condominiums are fast becoming a very different form of reality for millions, as these attached housing schemes become more and more commonplace. City planners, administrators and especially tax collectors love them because of the vastly increased concentrations of value-added real estate that occupy significantly smaller pieces of land.

Technically speaking a condominium is form of land ownership in which the owners of the individual condominium units do not acquire legal title to the physical land upon which their condominium is located. Rather they are the deeded owners of a “unit” or “units” within the development and along with the other “unit owners” they each share an undivided interest in the land the condominium occupies but the condominium association retains legal ownership of the real property the condominium occupies.

The individual who purchases a condominium within the development is conveyed a deed to a condominium unit. The term “unit” is most often used to describe the residential dwelling space that the unit owner occupies but it may also be used in reference to a deeded parking or storage space and in the case of a mixed-use development a buyer may purchase a commercial condominium unit. In all of these instances the term “unit” describes a deeded piece of property. So when a condominium buyer purchases a residential unit that includes a deeded parking space, the space will be defined by a legal description and the buyer will receive a deed to the parking unit.

In spite of the widely held view of condominiums as attached housing schemes there is nothing that prevents a development of single-family, detached homes from being platted and sold as condominiums. Although this form of condominium development is much less common than the attached horizontal and vertical housing developments that are typical of condominiums, they do exist and will no doubt become more commonplace as the number of condominium developments increases.

In future installments we will continue our examination of the history of HOAs  and the forces that have given rise to residential private governance in the United States.