It's my club, isn't it?

It’s my club, isn’t it?

When searching for our own little slice of heaven, there are many of us who are attracted to those communities with amenities.  These amenities can take many shapes and sizes.  Some amenities are as simple as a community swimming pool and adjacent tot lot.  Others prefer tennis courts and a community clubhouse with meeting rooms and fitness facility.  Still others prefer the macdaddy package with golf, restaurants, spa and everything except the French maid who cleans the home twice a week.  Anyway, you get the point.  There is an attractiveness to buying a home in a community that has some form of amenities. 

 People take pride in being able to come home and dine at their club.  They enjoy having friends come and golf at their golf course.  They relish in seeing their kids and grandkids swimming in their community pool.  However, what happens if that cool new fitness facility that you thought was your own really is not your own?

 I know.  I am confusing you again.  How can my pool not be my pool, my golf not be my golf, my fitness not be my fitness.  After all, I live in a gated community, or at least a community with an entry feature, and all these reasons why I bought here are right in the middle of the community.  Of course they are mine.  I pay monthly fees, I have my monthly newsletters.  Heck, I am even president of the bridge club.  Sound familiar? 

Well, the reality is that it may not be your club.  You see, when a developer builds out a community, they do not have any obligation to deed the amenities to the community.  Oftentimes, a developer will keep control of the amenities through the build out of the community.  While your HOA fees will typically have charges associated with the club and amenities, in these instances the charges will be use fees that the developer charges each homeowner for the use of these features.  This is different than when the club and amenities are owned by the HOA and your HOA fees include fees associated with the management and maintenance of the club.  In those cases, the HOA already owns the club.

OK, so what does that mean to me, right?  Well, if the developer keeps ownership of the club, there are several choices available to them at build out.  First, they can continue to own the club and collect the cash flow stream associated with the use fees that they charge you in your HOA fees.  Second, they may just deed it over to the community in the future.  Third, they can sell the club to the HOA.  In this case, the HOA will either need to institute a special assessment to all the homeowners to purchase the club, or they can obtain a loan for the purchase, in which case the homeowners pay debt service on the loan.  Fourth, they can sell the club to a third party, whereby you may or may not continue to have access to the amenities. 

Now, I could devote a whole new blog to what each of these scenarios may mean to you.  However, what I want to accomplish here is nothing more than to put you on notice when buying real estate.  It is not necessarily a bad thing buying into a community where the amenity has not been turned over to the HOA.  You do, though, need to recognize that there is probably an expense at some point in the future that you need to factor in if you want to make sure that the club you love so much remains your club to love.

On a positive note, it is very easy to find out who owns the club.  Just ask.  It is one simple question.  Does the HOA own the club.  If the answer is yes, you are done.  If the answer is no, or the salesperson or homeowner starts to dance around the question like Fred Astaire leading Ginger Rogers, then you have some more digging to do.  Remember, it is not a bad condition.  It is just something you need to be aware of.  After all, when you call your friends and ask them to come over to hang by the pool, it would be nice to be able to tell them whose pool they will be hanging out at.

Until next time…

 

Keep kicking the dirt.