What One Needs to Know About Common Interest Developments

A Common Interest Development (CID) is a term used to describe a place which provides residency yet the facilities are shared with other residents whom live in the same complex. The facilities can be anything from roads and heating furnaces to swimming pools and gymnasiums. CID’s provides a life of independence through a group of people who all share the benefits and consequences of sharing amenities; this is sometimes known as a homeowner association. The association has the authority to enforce special rules; covenants, conditions and restrictions (CC&R’s) and also has the right to raise money through fund raisers and other regular and special assessments.

Different Kinds of CID’s

Common interest developments come in all different shapes and sizes. The most common and well-known type of CID is the condominium or townhouse, which could be described as a vertical subdivision. A specific resident owns the airspace and inside wall surfaces of their housing units. The community association owns all other parts of the buildings, the land and any special facilities such as courtyard and recreation centers. Other less common types of CIDs include stock cooperatives and community apartments. Condos have numerous unique characteristics that apply to only them however, that would require a separate article to discuss.

In suburban and rural areas the most common type of CID is the planned development (PD), which used to be called a planned unit development (PUD). PD residents retain private ownership of their individual homes and lots but share the ownership of other common features. These shared amenities can include private roadways, water systems, parks and open space, parking lots, swimming pools, ponds and lakes, airport landing strips, tennis courts and ocean access. Some planned developments even share the ownership of forests and agricultural lands which produce income for the whole community.

The Evolution of CID’s and Trends

The first common interest developments in the US began in the late 1800s. These started out as ‘get aways’ for the rich with restricted covenants barring unwanted ethnic groups. By 1970, there were an estimated 10,000 CIDs in the US, inspired by new urban planning concepts and the increase in environmental awareness.

In California, common interest developments became overwhelmingly demanded following the 1978 passage of Proposition 13, which severely limited the power of local governments to raise revenues through property taxes. Critics claim that CIDs represent an alarming trend in the privatization of local government. Parks, open space, recreation facilities, roads and water systems – formerly enjoyed as a right of the general population – are now becoming the privilege of private communities. CIDs save local governments billions of dollars every year. It’s no wonder that local land use and fiscal policies increasingly encourage CIDs rather than address the needs of the general public.

The Community Associations Institute, a nonprofit alliance in Alexandria, Virginia, estimates there were over 200,000 residential common interest developments nationwide in 2001 with over 40 million residents, growing at the rate of 10,000 new CIDs per year. Recent estimates based on a California Senate Housing and Land Use Committee survey claim that seven million Californians now reside in 35,000 CIDs, with 1,000 CIDs being formed annually. These figures portray that nearly 20% of Californians and almost 15% of all US residents live in CIDs. Common interest developments are now the fastest-growing form of housing in the nation.

In California, CIDs are regulated by the Davis-Stirling Common Interest Development Act of 1985, which was co-authored by former Assemblyman and current Governor Gray Davis. This code, with subsequent amendments and case law, provides homeowners with a system of self-governance and dispute resolution.

CC&R’s

Each CID is governed by a set of bylaws and CC&R’s. The bylaws specify the number of directors on the community association board, how they are elected and their terms of office. The CC&R’s are much like a private zoning ordinance, addressing such things as minimum house size, property line setbacks, design control, fences, trees, domestic animals, RV and boat storage and home occupations. CC&R's usually take priority over local zoning because they are more restrictive.

Home owners automatically become members of the community association when they purchase a home and also automatically give up their membership when they sell the property. The CC&R's are recorded as restrictions on the deeds of individual home owners and run with the land. The community association has the power to enforce the CC&R’s, collect regular and special assessments, and impose fines for violations, record liens and even initiate non-judicial foreclosure proceedings to collect unpaid assessments. Most associations attempt to resolve disputes privately or via negotiation and settlement. However, either the association or individual homeowners have the right to file lawsuits to impose the regulations.

CC&R’s cannot include any requirements which violate existing laws such as housing discrimination based on race, color, religion, sex, familial status, marital status, disability, national origin or ancestry. As of January 1, 2001, CIDs cannot completely outlaw pets. The Federal Housing Act of 1995 allows “adults only” communities which meet specific requirements. CIDs cannot ban manufactured homes as long as the homes correspond to community design standards.

Pros and Cons

There are some definite pros and cons to living in a common interest development. Due to the shared ownership feature, CID residents enjoy such things as dependable water systems, well-maintained roadways, open space, recreational facilities and even ocean access that they may not be able to afford otherwise. CID’s often provide a sense of unity within the community as well as a strong sense of security. Gated communities prevent crime, vandalism and unwanted solicitations. Innovative subdivision designs such as clustering can increase residential densities, protect environmental resources and lower housing costs. Some CIDs have regular social events and hold “clean up parties” to help maintain the common areas.

The cons of common interest developments include lack of homeowner participation, controversy among residents, and overzealous enforcement of CC&R’s and delayed maintenance of common facilities. Residents must pay association fees in addition to local property taxes, which some consider to be a type of double taxation. In many associations, a small group of residents do all the work, usually volunteering their services. Only the largest common interest developments can afford trained management.

Checklist Before you Purchase:

• Ensure you request a complete information packet from the community association for the CID you are inquiring about.
• Talk to your future neighbors, if possible, and find out if the association is running efficiently or if there are on-going feuds and petty disputes which may suggest a dysfunctional community association.
• Take note the quality and condition of the shared amenities, considering these are the facilities you will be using yourself. If you hire a home inspector, which is strongly advised, they usually don’t inspect any commonly-owned facilities.
• Find out if there are sufficient reserve funds for the continued maintenance and/or replacement of common facilities.
• Take note of the number of full time residents, how many homes are occupied by renters, how many are vacation rentals and how many homes are vacant most of the time. Communities with fewer full-time residents may have less demand for maintenance and owner participation.
• If there is a community water system, definitely ask to see a recent water system report (annual water reports are required in California).
• If you’re applying for a loan, make sure the appraiser considers the value added by the common elements. Comparable sales should be selected from other CIDs if possible.
• Read the CC&R’s very carefully and in your own time and make sure you would feel comfortable abiding by all the rules.
• Plan to be an active member in the community association. Don’t expect your neighbors to do all the work or stand for your criticism and complaints.
• Note how well the CC&R’s are imposed by the association. Lack of enforcement or overzealous enforcement can lead to future disagreements and even lawsuits.
• Verify what regular and special assessments the CID has been given throughout the past 3 or 4 years. High assessments will definitely increase the cost of housing whereas low assessments may signify differed upkeep.