What is the difference between a Common Interest Community and a Condominium?

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And how do you determine whether the Condominium Ownership Act or the Vermont Common Interest Ownership Act applies to your Development?

In Vermont, condominium communities are creatures of statute. In other words, if you own or are purchasing a condominium unit, the Vermont statutes are the starting place for determining what may occur within the community. Equally important are the community’s declaration, bylaws, and rules. We will discuss the significance of these documents in future articles. This article provides a general overview of the impact of Vermont statutes on your community.

Two relevant statutes are in place in Vermont: the Condominium Ownership Act first enacted in 1967 (the “COA”) and the Vermont Common Interest Ownership Act first effective January 1, 1999 (the “VCIOA”). To determine whether you or your homeowners association may or must undertake a certain action, you must first identify the community type and whether the COA or VCIOA applies.

What are the Distinctions between Common Interest Communities, Condominiums and Planned Communities?

To answer this question, we look at the definitions provided by the VCIOA.

Under the VCIOA, a “common interest community” is real estate, with respect to which a person, by virtue of their ownership of a “unit”, must pay for a share of the expenses incurred in connection with the “common elements”, other units, or real estate other than the owner’s unit. Examples of such expenses include real estate taxes, insurance premiums, and maintenance, improvement, and other service costs. Under the VCIOA there are three types of common interest communities in Vermont: the “condominium”, the “planned community” and the “cooperative”. Cooperatives are not often used in Vermont, despite their popularity in other areas, such as New York City. Condominiums and planned communities, however, are very common in Vermont.

The VCIOA defines a “condominium” as a type of common interest community where some portions of the development’s real estate are designated as “units” and are separately owned. The remainder of the real estate in the development is designated for common ownership by all of the owners of the separate units. In a condominium, a unit is commonly thought of as a multiroom “box of air”. The common elements are all other property at the development except the units and typically include building roofs, walls, and foundations, sidewalks, roads and landscaping. Therefore, to be a condominium, the unit owner must own an undivided interest in the common elements.

A “planned community”, on the other hand, is defined as any common interest community that is not a condominium or a cooperative. Subdivisions are a familiar example of a planned community because they involve developments where roads and recreational facilities are privately maintained and paid for by community members but common elements are typically owned by a community association not the unit owners.

Which Statute Applies, the VCIOA or COA?

This analysis is more complicated than you might think. The easiest analysis point is that the VCIOA applies to all common interest communities created in Vermont after January 1, 1999. The COA does not apply at all to communities created after January 1, 1999. On the other hand, the COA does apply to condominium developments created before January 1, 1999, and those developments are essentially grandfathered. While the COA does not apply to communities created after January 1, 1999, parts of the VCIOA may apply to developments created prior to January 1, 1999.

The VCIOA identifies certain of its statutory provisions that apply to, what it calls, “preexisting common interest communities” that are otherwise subject to the COA. For instance, homeowners associations and unit owners are subject to the VCIOA’s resale certificate and recordkeeping requirements, even if the community predates the VCIOA. In essence, the attorney must review the Association’s governing documents to determine which of their provisions must be amended by the retroactive provisions of the VCIOA. The analysis is further complicated by the fact that the VCIOA was substantially amended effective January 1, 2012, and contains new mandatory provisions with different retroactive effective dates. These 2012 amendments to the VCIOA are very important because they require modification of certain governance and management practices for all pre-1999 communities.

Along with the mandatory requirements, the VCIOA also allows much greater flexibility and efficiency with respect to certain aspects of community operation and governance. These provisions will often require amendment of the Association’s governing documents to achieve the additional efficiency and flexibility provided. Some Associations have amended theirs to embrace the VCIOA and this flexibility in its entirety. Given that 10 years have passed since the VCIOA amendments became effective, most Associations have amended their declaration and bylaws to meet the new requirements for preexisting communities. Certainly there are a few that have not and many Associations that do not follow all of the requirements as a matter of standard practice.

In conclusion, whether a particular action is required or allowed within a community must be analyzed on a case by case basis, taking into consideration (1) the activities and practices in question and (2) a detailed review of the community’s governing documents and the applicable provisions of the VCIOA and COA .

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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