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Glossary of Terms

Key terms

While working with your mortgage company in purchasing a condo, it’s important to understand the mortgage terms that may be used so you can have a better (and easier) discussion with your mortgage company.

Annual Meetings

Typically, meetings at which the condo board and management company report to the owners on management and financial matters, and non-board owners may have the opportunity to speak and discuss issues of concern. In some condos, elections may be held during the annual meetings.

 

Appraisal

A written estimate or opinion of a property’s value prepared by a qualified appraiser.

Bylaws

Rules governing the internal management of the condo. You should review these prior to purchase because when you buy, you agree to abide by the condo bylaws.

Condo Fees/Dues (also known as HOA Fees/Dues)

Amounts paid, usually monthly, by unit owners to meet daily operating costs as well as contributions to the required reserve fund. Condo fees are not included in your monthly mortgage payment and must be paid directly to the condo/homeowners’ association, usually through a professional management company. It is important to understand what is and is not included in the fees, as it varies from condo to condo.

 

Common Elements (areas)

Those portions of a building, land, and amenities that are used by all the unit owners, who share in the common expenses of their operation and maintenance. Common areas may include swimming pools, tennis courts, common corridors of buildings, parking areas, entrances and exits, and community rooms or centers.

 

Condominium

A form of homeownership that combines individual ownership of a unit with shared ownership of common facilities. Each owner has a separate mortgage for his or her unit and is responsible for making the payments on the loan and paying associated real estate taxes. An elected board of directors is responsible for operations and management of the common facilities. Each owner pays a monthly recurring fee that covers their share of the cost to repair and maintain the common facilities.

Declaration

Also known as a “master deed,” this is a legal document that formally creates the condominium corporation in accordance with state law. The declaration defines the units and common property and specifies the interest each owner has in the common elements.

There are no terms for "E."

There are no terms for "F."

There are no terms for "G."

HO-6 Insurance

Condo unit owner’s property insurance policy covering the unit interior. Condo buyers may be required or choose to purchase an HO-6 policy to obtain mortgage financing (see also Master Insurance).

There are no terms for "I."

There are no terms for "J."

There are no terms for "K."

There are no terms for "L."

Master Insurance

An insurance policy purchased by a condo or homeowners’ association to provide coverage for the building exteriors and common elements; interiors of individual units may be included. Costs are borne by the condo owners through condo fees (see also HO-6 Insurance).

There are no terms for "N."

Owner Occupancy

Refers to individual condos being occupied by their owners (not rented out by the owner). The higher the rental rate, for example, the lower the rate of owner occupancy.

There are no terms for "P."

There are no terms for "Q."

Replacement Reserve Fund

A fund set aside for replacement of common property in a condominium project. The amount of the fund is typically determined by periodic reserve studies conducted by experienced professional reserve analysts.

Special Assessments

Special levies (charges) against individual unit owners in a condo project to cover the homeowners’ association’s expenses and/or to repair, replace, maintain, improve, or operate the common areas of the project. These levies are in addition to the normal, recurring common element fees/expenses.

There are no terms for "T."

There are no terms for "U."

There are no terms for "V."

There are no terms for "W."

There are no terms for "X."

There are no terms for "Y."

There are no terms for "Z."

Annual Meetings

Typically, meetings at which the condo board and management company report to the owners on management and financial matters, and non-board owners may have the opportunity to speak and discuss issues of concern. In some condos, elections may be held during the annual meetings.

 

Appraisal

A written estimate or opinion of a property’s value prepared by a qualified appraiser.

 

Bylaws

Rules governing the internal management of the condo. You should review these prior to purchase because when you buy, you agree to abide by the condo bylaws.

 

Condo Fees/Dues (also known as HOA Fees/Dues)

Amounts paid, usually monthly, by unit owners to meet daily operating costs as well as contributions to the required reserve fund. Condo fees are not included in your monthly mortgage payment and must be paid directly to the condo/homeowners’ association, usually through a professional management company. It is important to understand what is and is not included in the fees, as it varies from condo to condo.

 

Common Elements (areas)

Those portions of a building, land, and amenities that are used by all the unit owners, who share in the common expenses of their operation and maintenance. Common areas may include swimming pools, tennis courts, common corridors of buildings, parking areas, entrances and exits, and community rooms or centers.

 

Condominium

A form of homeownership that combines individual ownership of a unit with shared ownership of common facilities. Each owner has a separate mortgage for his or her unit and is responsible for making the payments on the loan and paying associated real estate taxes. An elected board of directors is responsible for operations and management of the common facilities. Each owner pays a monthly recurring fee that covers their share of the cost to repair and maintain the common facilities.

 

Declaration

Also known as a “master deed,” this is a legal document that formally creates the condominium corporation in accordance with state law. The declaration defines the units and common property and specifies the interest each owner has in the common elements.

 

HO-6 Insurance

Condo unit owner’s property insurance policy covering the unit interior. Condo buyers may be required or choose to purchase an HO-6 policy to obtain mortgage financing (see also Master Insurance).

 

Master Insurance

An insurance policy purchased by a condo or homeowners’ association to provide coverage for the building exteriors and common elements; interiors of individual units may be included. Costs are borne by the condo owners through condo fees (see also HO-6 Insurance).

 

Owner Occupancy

Refers to individual condos being occupied by their owners (not rented out by the owner). The higher the rental rate, for example, the lower the rate of owner occupancy.

 

Replacement Reserve Fund

A fund set aside for replacement of common property in a condominium project. The amount of the fund is typically determined by periodic reserve studies conducted by experienced professional reserve analysts.

 

Special Assessments

Special levies (charges) against individual unit owners in a condo project to cover the homeowners’ association’s expenses and/or to repair, replace, maintain, improve, or operate the common areas of the project. These levies are in addition to the normal, recurring common element fees/expenses.