Recently, we showed a new condominium, and my clients were told by the agent that they would own the land under their freestanding unit. This is not possible in condo ownership, but the agent insisted on it and became rather incensed. This got me thinking about the basics of condos.
What is a condo?
Buyers often think of a condominium as a multistory building. But a condominium is not limited to tall buildings. A condominium here in Austin has units with close to an acre of land around each. A condominium is not a type of building. It is a type of ownership. It should never be described in terms of any construction style.
How can you identify a condo?
In order to identify a condo, you have to check the legal description. In a non-condo (fee simple), you individually own the land and all improvements. The legal description might read: “Lot 5, Blk A, Green View Addition.” A townhome would also have this description if the building sits on a separate lot.
In a condo (fee simple), you individually own a defined part of the improvements, plus an undivided interest in all remaining improvements and land. A condo description might read: “Unit 40, Green View Condominiums, plus 1.45 percent interest in common area.”
What makes a condo a condo?
Direct ownership of common elements is key to a condominium. The common elements usually include the structure of the buildings, driveways, amenities and land. To be a condominium, the ownership interests in the common elements must be vested in the unit owners.
In a non-condo development, (a lot subdivision) the owners may own a separate entity, such as a a homeowner’s association (HOA). The HOA may own common areas. The lot owners do not have direct ownership of the common areas, as they do in a condominium.
What are the unit’s boundaries?
The unit is the part of the property that is owned individually. I’ve heard it said that the unit begins with the interior paint. If interior paint is the boundary, then individual ownership would include cabinets, appliances, and all built-in items.
But wall paint is not always the boundary of a unit. To know the unit boundaries, you have to read the condo documents. Unit boundaries are often the dividing line between what the unit owner maintains, and what is covered by the general budget. Buyers should know their unit boundary before buying.
A client recently purchased a free standing condo in which the unit boundaries were “the exterior walls, roof and foundation.” So, in this condo, individual ownership and maintenance includes the roof, exterior walls and foundation.
Is there limited common area?
Limited common areas are often shown in the condo documents. These are common areas for the exclusive use of a certain owner (or owners) and may include decks, yards or other features. Limited common elements are owned by all unit owners.
The maintenance of limited common elements is borne by all unit owners, unless the condo docs say that maintenance belongs to the units benefited.
Is there a common budget?
In many condos, the unit owners pay dues into a common fund for maintenance of the common elements. However, some small condos have no dues at all. The owners of a two-unit condo may maintain their own units and limited common areas.
There are no standard maintenance rules that apply to all condos.
Who should explain condo documents?
Our contracts give buyers time to read the condo documents and re-sale certificate. We should make our buyers aware of the condo docs as soon as they become available. There is some interesting stuff in the condo docs — there may be rules pertaining to pets, parking, noise, renting, etc.
For questions, the condo manager is a good source for answers. A person in this position can say how an issue has been handled in the past. A real estate attorney is another good source. Realtors should not try to interpret condo documents.