What Is a Common Leasehold Interest in Property?
Understand the structure of leasehold property, a form of ownership that grants rights to a home for a fixed term but involves shared land and duties.
A common-interest development is a form of property ownership where an individual purchases a residence but also shares ownership and responsibility for common areas with other owners in the development. This arrangement is the standard for apartments, condominiums, and townhouses. This structure differs from traditional single-family home ownership, where a person owns the house and the land it sits on outright. Management and governance are handled through a homeowners association (HOA), which is controlled by the unit owners. The relationship between the owner and the association is governed by legal documents called the Covenants, Conditions, and Restrictions (CC&Rs).
Core Components of Common-Interest Ownership
An individual holds a “fee simple” title to their specific unit, meaning they own it in perpetuity. This allows them to sell, inherit, or mortgage their property. Alongside this, they hold a shared interest in the common elements, which can include hallways, elevators, roofs, landscaping, and recreational facilities like pools or gyms.
Instead of rent, homeowners pay regular fees to their homeowners association. These payments, often called “HOA fees” or “maintenance fees,” cover the costs for maintaining, repairing, and insuring the shared parts of the development. The HOA’s board of directors prepares an annual budget for these expenses, and the total cost is divided among the homeowners according to the rules set out in the governing documents.
Rights and Obligations of the Parties
Unit Owner
The unit owner has the right to the “quiet enjoyment” of their property, meaning they can live in their home without unreasonable interference from the association or other residents. As members of the association, homeowners also have the right to participate in the governance of their community, primarily by electing a board of directors to manage its affairs.
Failure to pay association fees can lead to penalties, liens against the property, and in some cases, foreclosure. Owners are also responsible for maintaining the interior of their own unit. Additionally, they must abide by the community’s covenants and rules, which may place restrictions on things like pets, noise levels, or making alterations to the property’s exterior.
Homeowners Association (HOA)
The HOA must maintain transparent financial records, providing owners with an accounting of how association funds are spent. The association has the right to enforce the community’s covenants and rules. If a homeowner violates the rules, such as by failing to pay their dues or making an unauthorized alteration, the HOA has the legal authority to impose fines or take other enforcement actions as outlined in the governing documents.
Management of Common Areas
The board of directors often hires a professional property management company to handle the day-to-day operations. This company may be responsible for collecting fees, arranging for repairs, supervising maintenance contractors, and preparing budgets and financial reports. The management company acts on behalf of the HOA and is paid from the association’s funds, meaning the cost is shared by all homeowners.