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Villas: HOA vs COA

Understand the financial impact of community governance rules before you buy.
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GOVERNANCE MODELS

Villa Governance Rules

Homeowner’s association (HOA) governed villas are quite common in South Florida. However, you may come across a villa that is governed by a condominium association (COA) during your home search. Generally speaking, COA dues are higher than HOA dues because they cover more maintenance and expenses. If you’re financing your villa purchase, it’s important to find out if the community is governed by a COA. Many condominiums are ineligible for FHA financing and require higher minimum down payments.

How to Tell if a Villa is Governed by an HOA or COA

You can determine if the villa in your community of interest is governed by an HOA or COA by searching for the property on the county tax appraiser’s website. Click HERE for Palm Beach County or HERE for Broward County. Once you locate the property, look for the legal description to see if it includes the words condo or condominium. If it does, the community is governed by a condominium association.

Alternatively, you can simply ask your Realtor. He or she can turn to the Multiple Listing Service (MLS) to determine how the villa is governed, how much the maintenance fees are and what they cover, and what restrictions apply in terms of ages, pets, leasing, and vehicles. It is worth noting that the information on the MLS is not always accurate. If the governing documents are not immediately available for review, a good agent will call the association directly to verify the information found on the MLS if you decide to make an offer.

HOA Governed Villas

Understanding Your HOA Fee Rules

If you purchase a villa that is governed by a homeowner’s association, you will be granted fee simple ownership. Fee simple ownership means that you take possession of the interior and exterior walls, roof, land, and mineral rights below ground. This is the highest form of ownership. With these rights comes more responsibilities. Homeowner’s insurance will be required to cover the structure, land, and your personal property. The homeowners association will maintain the common areas in the community and might cover utilities such as trash collection and water. If there is an HOA, be sure to find out what the maintenance fees are and what they cover. In most cases, you will be responsible for exterior maintenance and landscaping. The good news is you will have a wide variety of financing options.

COA Governed Villas

Navigating Condo Board Policies

If you purchase a villa governed by a condominium association, you will own the interior of the unit, but the building and land will be communally owned. Under this scenario, the condo association will be responsible for the maintenance of the roof, exterior of the building, and the land. You will be required to purchase a condo insurance policy to cover the interior of your unit and your personal property. Be sure that you know what is covered by the association’s master policy. Typically the master policy covers the building and the structure of your unit, but there are exceptions. Be sure to ask so that you can put together a realistic budget for your carrying costs. Financing a condo can present more challenges than financing a fee-simple property, especially if you plan on using an FHA loan.

Conclusion

HOA governed villas offer fee simple ownership. Fee simple is the highest form of ownership and will grant you title to the structure and the land. You will need to purchase a more comprehensive insurance policy and will likely have greater maintenance responsibilities. On the other hand, you will have more options for financing. If the villa is governed by a condominium association, there will probably be less maintenance required but financing could be more challenging.

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