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Condominium Ownership: Definition & Considerations

Instructor: Shawn Grimsley
Owning a condominium is significantly different than owning a detached house on your own lot. In this lesson, you'll learn about what exactly a condo is, it's key characteristics, and other considerations. A short quiz follows the lesson.

Condominium Defined

A condominium is a form of property ownership involving multiple unit dwellings where a person owns his or her individual unit, but the common areas are owned in common. All members share in the costs and maintenance of the common areas. A perfect example of a condo is a large apartment building where you own your individual apartment, but also share in the maintenance of the building's roof, hallways, lobby, elevators, driveway, landscaping, pools, fitness center, and other amenities.

Ownership

Owners of condos receive a deed for their unit just like if they bought a house. They also own their unit in fee simple, which is the least restrictive form of real estate ownership recognized by law. Just like owners of a detached home, a condo owner generally has the right to sell and use the unit as they see fit, unless there are covenants restricting such use or transfer. Basically, a covenant is an agreement that provides a right or imposes a restriction or condition that is binding on the owner of the condo. You'll also see covenants on the use of the common areas.

Owning a condo unit is significant differently than owning a detached house. For example, you may own the interior walls to your unit, but you may not own the exterior walls. In fact, sometimes you'll just own the airspace of the unit delineated by the walls of the unit along with any improvements you make to that airspace, such as paint, flooring and cabinets. Consequently, it's important to carefully review the condominium declaration and your unit deed to understand what you own and what you can do. We'll be discussing these documents in a moment.

Management & Condo Fees

A condominium association manages the condominium. All owners of a unit are members of the association, but that doesn't give each member legal authority to act on the condo's behalf. Members will elect a board of directors and officers to run the association and make decisions on its behalf.

Keep in mind that you'll be responsible for paying condominium fees that will be used to maintain the common elements and provide other condo services like landscaping and snow removal. These fees are often paid on a monthly basis much like a tenant pays rent. Moreover, if your condominium association doesn't maintain sufficient reserves, you may get hit with a special assessment for major or unexpected repairs.

Condominium Legal Instruments

Condo projects require a lot of legal paperwork. Let's take a quick look at the types of legal instruments that are involved in forming and operating a condominium.

One of the most important legal instruments is the Declaration of Condominium, which is sometimes called a Master Deed or Condominium Declarations. The Declaration of Condominium is recorded with the county authority responsible for recording deeds and other real estate records like mortgages and easements. The requirements for a Declaration of Condominium vary depending upon the state where the condo will be located. Common requirements include:

  • The name of the condominium
  • Legal description of the land and buildings
  • Description of each unit in the condominium and where it's located in the building
  • Description of the condo's common areas and any restrictions on the use of the common areas, such as prohibiting commercial use of the lobby
  • How each unit's percentage interest in the condominium and voting rights are allocated
  • Restrictive covenants and conditions on occupancy, use and transferring of units
  • Procedures for making decisions on repairs and improvements to the common elements

Restrictions on how you use the common areas as well as restrictions on the occupancy, use and alienation (i.e., transferring) of individual units are part of the condominium's covenants, conditions and restrictions, which are often referred to as CC&Rs. For example, if the CC&Rs prohibit pets in units, you'll have to comply even though you own the unit.

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