Could this be a condo? Or a PUD? Or neither?There’s quite a bit of confusion around the difference between common interest developments (CID) , condominiums, and planned unit developments (PUD). What do these labels mean, and how does anyone know which one is which? Where do townhomes fall in this list? And more importantly, why do they matter?

CID, PUD, and Condo: Ownerships Explained

Part of the confusion stems from the fact that there are two things to consider: the architecture of the buildings and the type of ownership.

  1. What is a condominium or condo?  A condominium is a type of ownership of the real estate, not an architectural style.  Condo ownership means that the purchaser has 100% rights to the unit and a percentage of ownership in the common lands (fractional ownership in common areas). Buyers of a condo are buying the space between the walls (and a fraction of ownership elsewhere).
    • Condos can architecturally be a unit that resembles an apartment (what we colloquially refer to as a condo), a townhouse, or even a house.
  2. What is a townhouse (or townhome)?  A townhouse is a type of building or architectural style, not the type of ownership involved. A townhouse could be a planned unit development (PUD) or it could be a condominium.
    • Townhouses are often 2 stories and attached on at least one side, but they don’t have to be. They could be one story and they could be detached.
    • A townhouse that’s a condo can look exactly the same as a townhouse that’s a PUD.
  3. What is a PUD?  A planned unit development is architecturally either a townhouse or a house in which 100% of the unit plus the land under it is owned and the ownership of the unit also provides for a membership in the homeowner’s association or HOA.  The HOA in turn owns all the common elements (such as private roads and amenities such as a pool, tennis court, parking lots, etc.). With a PUD, homeowners have an easement and rights to use the common area through their HOA membership.
  4. What is a CID?  A common interest development, or CID, is a general term meaning the ownership of property in which there are “common areas” such as private roads, a pool, parking, tennis courts, utility rooms etc. These could be condo complexes or home owners associations with houses, townhouses, or other types of homes.

Local examples: In Los Gatos we have some freestanding houses (or properties with the only common wall being at the garage) which are in condo ownership on Ohlone Court.  Same with the beautiful Villas of Almaden community. Both have “common areas” and mandatory membership in the home owner’s association.

 

 

How can you tell if the townhouse is in a PUD or Condo CID?

Sometimes the info is right in a property profile, which is very easy for most real estate agents to obtain through their preferred title company.  More often, though, to be certain of the ownership type it’s necessary to review the preliminary title report.

Here’s how a condo is identified in a prelim (what to look for):

The estate or interest in the land hereinafter described or referred or covered by this Report is:
Condominium as defined in section 783 of the California Civil Code

Here’s how a PUD is identified in a prelim

The estate or interest in the land hereinafter described or referred or covered by this Report is:
Fee

Why does it matter if a San Jose townhouse is a condo or PUD / PD?

Whether a CID is a PUD or a condo is actually of huge importance to homebuyers today if they hope to purchase an affordable Silicon Valley home with financing.  If the complex is in “condo ownership”, normally the whole complex must be approved by the lender in order to get  financing.  But if it’s a PD or PUD, that approval is not necessary, as they treat the home as if it were a single family home!  This is most important in the less expensive Silicon Valley townhouses for sale, of course.

There are other practical reasons on why it matters. Most of the time with a PUD, you have more freedom or at least fewer regulations on what can be done inside your unit. Last year we showed a townhouse held in condo ownership in which the HOA’s architectural committee demanded approval before even changing a light fixture inside the home. You are unlikely to run into that in a PUD (and to be fair, that was extreme even for a condo.)

How can you tell if a townhouse that’s in condominium ownership is FHA approved?

We don’t see a ton of FHA backed home purchases in our area, but if a buyer does buy a home that way, a condo complex would need to be approved. The best way to learn if the Silicon Valley townhouse for sale is in an FHA approved complex is to talk to your lender.  He or she may have multiple ways of checking the complex’s approval status.  You can also check online (I’m just not sure how current this is!) at the HUD website listing condo communities that are either approved or pre-approved.

Common interest developments, or CIDs, can encompass a wide range of home types, including houses, townhouses, or structures which look like apartments.  The common features can be few (private road only) or many (pools, tennis courts, expansive lawns or hiking areas, ponds, horseback riding trails and more).  Details on what’s included can usually be found in the Covenants, Codes and Restrictions (CCRs).

 

More reading: 

Definition of Planned Development (not on any of our sites)

The Challenge of Being an FHA Home Buyer in a Seller’s Market

How Important are Parking Spaces and Garages in Silicon Valley?

Why Isn’t My Silicon Valley Townhouse Selling?

More articles of interest on my other Silicon Valley real estate websites:

Silicon Valley home buyer tips
Buy a home in Silicon Valley (many pages of content)
Relocating to Silicon Valley