Common-Interest Property Ownership in California: How Does it Work?

With characteristically outrageous housing prices, it can be hard enough to own a home in California, let alone have extra amenities like pools or basketball courts. That's where common interest communities, also known as common interest developments, or CIDs, come into play. In a common interest development, individuals own their own personal housing units in some form, while they share ownership of common areas and certain common amenities with others in the community. The California Civil Code dives into this type of real estate in detail starting in Section 1351, but the basics of CIDs break down pretty clearly.

Property owners, or, more specifically, purchasers, in a community interest development are all part of a homeowners association (HOA), often created at the time of the property's development, which provides maintenance of the common areas. Depending on the type of CID, the HOA may be either an incorporated or unincorporated association. Likewise, the developer of the shared property creates a code of rules and regulations for the community property, known as covenants, conditions and restrictions, or CC&Rs. So long as the CC&Rs don't conflict with the laws or public policy governing the jurisdiction of the property, they're enforceable; the HOA may sue CID purchasers for violating the rules or failing to pay assessments, enlisting the help of California courts to enforce the CC&Rs.

In addition to maintenance, the HOA administers fees and assessments of the property and also handles leasing duties. In many ways, the HOA serves as the sort of governmental body for the common interest community. As Orange County Judge Tully H. Seymour wrote in a 2000 court case, the HOA functions "almost as a second municipal government, regulating many aspects of the homeowners’ daily lives." While purchasers enjoy sole rights to dwelling units, common property at CIDs typically includes elements like green spaces, swimming pools, tennis courts, basketball courts, interior hallways, stairs, elevators, mailboxes, barbecue areas and club houses.

Read More: Homeowners Association Rules in California: What Can The HOA Regulate?

Whether it's a condo, townhouse, co-op, time-share, vacation property or retirement community, common interest properties in the Golden State can be either residential or commercial in nature, according to the California Association of Local Agency Formation Commissions (CALAFCO). All of these options fall into different legal containers; the state of California recognizes four specific types of CIDs:

• Community apartment project: Popularized in the 1950s and 1960s, each purchaser of a separate interest in a community apartment project has exclusive rights to occupy her specific dwelling unit, as well as an undivided interest in the apartment's common areas. CAPs can be formed by unincorporated associations.
  
  
• Stock cooperative: In this case, the whole CID is owned by a cooperative corporation, and the occupants are not technically owners, but tenants with long-term leases who own shares of stock in that corporation. However, per California law, interest in a stock cooperative is interest in real property. Though popular in the 1970s, California's Subdivision Map Act of 1979 essentially eliminated stock cooperatives, classifying them instead under the definition of subdivision. 
  
  
• Condominiums: In a condo CID, purchasers have separate interests in spaces defined in the condominium plan (residential spaces) and undivided interest in common areas. While this is similar to a community apartment project, CAP purchasers have undivided interest in the property's land while condo purchasers have undivided interest in the portion of the real property known as the unit — typically either the interior cube of a residence or the cube or airspace that also includes a yard.
  
  
• Planned developments: This remaining catch-all type of planned community makes up the vast majority of new common interest developments in California, at about 70 percent of filings according to CALAFCO. The second most popular type is condos. Planned developments are divided into lots and common areas. The common areas can either be easements, in which purchasers have the legal right to use the property but do not have the title to the land, or separate lots owned in fee simple, which grants the purchaser full ownership and enjoyment of the property.

Read More: Buying a Condo in California: Pros and Cons of Buying a Condominium

While the basics of California's CID legislation can be found in Sections 1350 to 1376 of the state's Civil Code, collectively known as the Davis-Stirling Common Interest Development Act, some key local legislation has continued to define how common interest communities work. These state laws include:

• The Subdivision Map Act: In addition to grouping formerly stock co-ops into subdivisions, this state law grants California localities the right to control the design of subdivisions through the mapping process. Developers must have tentative tract maps approved by the locality, and the construction must meet the conditions of that approval. 
  
  
• The Subdivided Lands Act: Found in the Business and Professions Code, Section 11000, this act gives the Department of Real Estate the ability to issue regulations pertaining to CIDs, including arrangements for transferring common areas, rules for property assessment and procedures for meetings and voting.
  
  
• The California Corporations Code: The California Corporations Code is extremely relevant to the development of common interest communities, as it defines the rules for corporations and unincorporated associations. Sections 7710 through 8910 govern nonprofit mutual benefit corporations, which make up the majority of the associations that form CIDs. In Sections 5110 through 6910, and 20000 through 21401, respectively, this state law also governs nonprofit public benefit corporations and unincorporated associations. The code also outlines bylaws for how these entities must operate, which in turn directly affects how HOAs run their board of directors.

Read More: Land Use Laws in California: Planning, Development and Zoning Regulations