Ch7. Condominium Law & Deed-of-Trust Security Interests — Ownership and Specialized Liens

Purpose of Condominium Law

State Condominium Acts (e.g., the Uniform Condominium Act and state equivalents): Govern ownership structure and governance of multi-unit properties such as condominiums, cooperatives, and mixed-use buildings.

Common examples of condominium-style developments:
- Traditional residential condominiums
- High-rise apartment conversions
- Commercial condominium suites
- Mixed-use (residential + retail) towers

Structure of Condominium Ownership

Three Core Components

Condominium ownership consists of:
① Individual unit: Each unit owner holds fee simple title (the
   "unit interest") — the primary object of ownership
② Common elements: Hallways, stairwells, elevators, roof, exterior
   walls — owned as tenancy in common by all unit owners
③ Limited common elements: Balconies, assigned parking spaces,
   storage lockers — common elements reserved for specific units

Individual Unit

Must be structurally and functionally independent to qualify as a separate condominium unit
Owner may freely transfer, mortgage, or encumber the unit

Common Elements

General common elements: Hallways, elevators, mechanical rooms
  (automatically shared by all owners)
Limited common elements: Balconies, parking spots assigned to a
  specific unit (shared only among designated owners)

Decision thresholds for common-element actions:
- Routine maintenance: Board of Directors authority (majority vote)
- Major repairs / improvements: Unit owner vote (majority or
  supermajority, per CC&Rs)
- Material alteration: Supermajority vote (often 2/3 or 3/4)

Appurtenant Interest in Common Elements

Rule: Individual unit and its undivided interest in common elements
  cannot be separated — they are always transferred together.
→ Selling a condo unit automatically conveys the proportionate
  share of common elements

Exception: CC&Rs may permit separate conveyance of limited
  common elements (e.g., selling an assigned parking space) if
  specifically authorized

HOA (Homeowners Association) Governance

The Association

The HOA is automatically formed upon recording the Declaration of Condominium — no separate organizational steps needed.

HOA meeting vote thresholds (typical under the Uniform
Condominium Act; check your state's statute):
Ordinary resolution:   Majority of voting power present / by proxy
CC&R amendment:        2/3 or 3/4 of total voting power
Termination of condo:  4/5 of total voting power (varies by state)

Board of Directors / Managing Agent

Elected by unit owners at the annual meeting. Executes day-to-day HOA functions.

Board authority:
- Maintain and repair common elements
- Levy and collect assessments (HOA fees)
- Represent the HOA in litigation and contracts

Managing agent qualification: Need not be a unit owner
  (professional property management companies are common)

Common Condominium Disputes

Noise Between Units

State nuisance law + HOA rules govern noise complaints. The HOA may adopt and enforce noise rules through its CC&Rs. Persistent violations can result in fines or injunctive relief.

Unauthorized Modifications / Encroachments

Unauthorized modifications to common elements → HOA may demand restoration to original condition. CC&R violations → HOA board may fine the offending owner after proper notice and hearing.

Deed of Trust and Non-Standard Security Interests

Overview

Deed of Trust (used in ~30 US states as the standard mortgage equivalent): The borrower (trustor) conveys bare legal title to a neutral trustee, who holds it for the benefit of the lender (beneficiary). On default, the trustee may conduct a non-judicial foreclosure sale under the power of sale — faster than a court-supervised mortgage foreclosure.

Deed of Trust structure:
Loan funded + Deed of Trust recorded (security instrument)
         ↓ Borrower defaults
Trustee issues Notice of Default → waiting period
→ Trustee's Sale (foreclosure auction)
→ Winning bidder takes title / lender credit-bids
→ Surplus (if any) paid to junior lien holders and borrower

Settlement / Cure Period (Mandatory)

Equity of redemption: Borrower has the right to cure the default and reinstate the loan up until a statutory deadline (often 5 business days before the trustee’s sale).

Typical non-judicial foreclosure timeline (varies by state):
① Borrower defaults
② Lender/servicer records Notice of Default (NOD)
③ Statutory waiting period begins (e.g., 90 days in California)
④ Notice of Trustee's Sale recorded and published
⑤ Trustee's Sale held (auction)
⑥ Trustee's Deed Upon Sale issued to winning bidder

Junior lien holder notification: Lenders must send notice of default to all recorded junior lien holders so they may cure or bid at the sale.

Effect of the Deed of Trust

If lender proceeds to trustee's sale without completing
required statutory notices:
→ Sale is voidable; junior lien holders may challenge
→ Borrower retains right to cure during statutory period
→ Improperly conducted sale may be set aside by court

Key Concept Cards

Unit + Common Element Interest Are Inseparable ★★★★★ : A condominium unit and its appurtenant undivided interest in the common elements are always conveyed together. You cannot sell the unit and keep the parking structure interest separately (unless CC&Rs expressly allow it). Memory hook: Unit + common elements = always a package deal

HOA Vote Thresholds ★★★★★ : Ordinary matters: majority. CC&R amendments: 2/3–3/4. Termination: often 4/5. Know your state’s exact numbers. Memory hook: Ordinary ½, CC&R ¾, termination ⅘

Deed of Trust Cure Period ★★★★☆ : Borrower may reinstate the loan and stop foreclosure by paying all arrears plus costs within the statutory cure window (before the sale date). After the sale, the right of redemption is generally extinguished in non-judicial states. Memory hook: Deed of Trust foreclosure = cure window before the sale

Practice Quizzes

Q. One unit owner has been exclusively using the rooftop terrace, a general common element. What rights do the other owners have?

The rooftop is a general common element owned by all unit owners as tenants in common. The unauthorized exclusive use constitutes a trespass/nuisance. The HOA or any individual unit owner may seek an injunction compelling the occupying owner to restore access and may seek damages.

Q. A lender proceeds to a trustee’s sale without serving the required Notice of Default on a recorded junior lien holder. What are the legal consequences?

The trustee’s sale may be challenged by the junior lien holder as defective. Courts in most states will void or set aside a sale conducted without proper statutory notice to recorded junior interest holders. The lender must restart the foreclosure process with proper notices.

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