Appraisers sometimes erroneously report to the lender that a property is a condominium when it is in fact a planned community. Prior to issuing a condominium or planned unit development (PUD) endorsement, the title search and specific recorded documents may need to be reviewed in order to answer questions raised about the type of community in which the property is located. (A planned community may sometimes be referred to as a “Planned Unit Development” (PUD), although planned community is the statutory term used in the Connecticut Common Interest Ownership Act.)
The declaration that is recorded on the land records determines whether or not the community is a condominium, and therefore also determines whether a condominium endorsement can be attached to the title policy. A condominium is defined as a common interest community wherein portions of the real estate are designated for separate ownership by the unit owner, and the remainder of the property is designated for common ownership by all of the unit owners. An undivided interest in this common property, also known as the common elements, is vested in and specifically allocated to the owner of each condominium unit.
If the recorded declaration creates a planned community, then a planned unit development endorsement (PUD) can be attached to the title policy. A planned community is a type of common interest community wherein the homeowners, upon taking title to a unit, become members of the Homeowners’ Association and share the use of and expenses for the common elements, such as open spaces or recreational facilities. While owners of units in a condominium also become members of an association and are also allocated a share of the liability for common expenses, only a condominium declaration will contain an allocation for an ownership interest in the common elements. By contrast, the common elements in a planned community are owned by the association, and therefore a declaration for a planned community will not contain any allocation for the ownership interest in the common property.
If you are unsure as to whether or not a condominium or planned unit development endorsement should be attached to the title policy, please call me or contact your local CATIC office.