Condominium - A Type Of Ownership

Not A Type Of Architecture

So you think you know what a condominium is? Well everyone does - right? You don't know exactly how to define it, but you know one when you see one. Wrong. Here is an opportunity for you to learn a couple of basic principles that are often forgotten or not understood even by many who practice in the field of real estate.

First, forget the idea that a condominium is a type of architecture, building, or house. Not true. In various parts of the United States, you can find single family detached homes, townhomes, single floor residences on top of other residences, high rises and mid-rises, boat docks, industrial parks, office complexes - virtually any type of real estate that can be in a condominium style of ownership. You see, the word ownership is the key.

Ownership is the key, but it is not what each individual owner owns that is most important in understanding a condominium. We will get to the unit later. What is critical to understand is that all owners own an individual share of whatever is considered common for that property.

Well, how is that different from a homeowners association?

In a non-condominium association (we aren't going to talk about cooperatives), it is the association that owns whatever is common. All owners are members of that association. Depending on what part of the country that you live in, there are many different names for a homeowners association. States with Common Interest Acts often call them planned communities. They also are called owners associations, property owners associations, planned unit developments, and sometimes called even a more generic term - community association. Whatever you call them, because the association owns whatever is common and all of the owners are members of the association, it is not a condominium.

Besides being able to impress someone in the field, why else does this distinction matter to me?

It can be very important. If you are a Board member, homeowner, or working professional with an association, appreciating these distinctions can be very helpful in sorting out the appropriate association operations, policies, and procedures. Depending on the state in which you live or practice, it may determine the extent of statutory influence there is on how you run that association. Again, depending on location, it may affect such things as local taxes, real estate taxes, insurance, refinancing requirements, and even resale values. If you happen to be involved in the design or development of a new property with an association, understanding these unique distinctions can help you in dealing with typical approval challenges involved with zoning, land use, and density.

So this is more than a matter of semantics or failure to communicate. Now what?

For the future, much will be determined by you and everyone who practices in this field and lives in such associations. Keep in mind that with a few famous exceptions, you are involved in ownership, lifestyle, and systems that have had no more than 30 years to evolve. The collective practitioners in the field have not been successful in establishing a consensus with, terms for the same thing. This article has already demonstrated the numerous names given for those membership associations that own real estate that are neither a condominium nor a cooperative. Remember, homeowners association ... property associations ... etc.?

Perhaps another example of our collective struggle with terms is appropriate. There are generic terms that theoretically encompass all three types of associations. For example, if you live in a state with one or more of the Uniform laws, you will recognize the term CIC or Common Interest Communities. If you are reading this in California , the term Common Interest Development or CID is familiar. If you are a CPA, your profession uses the term Common. Interest Realty Association (or CIRAs). If there is a most common or popular term, it is community association. (Ironically, the confusion is compounded because many drafters of association documents use the term community association to represent the one specific type of association - non-condo, featuring the association ownership of what is common.)

With that background, it should not be surprising that our world has not produced a consistent term or terms for those types of architecture that are commonly misnamed condominium. For example, parts of the country call a one-floor residence or residences constructed on top of each other as flats or apartments. Both of those terms come with bad baggage - particularly the second one because its most common use implies a rental rather than owner relationship. We do a little better describing buildings containing single-floor residences such. as a mid-rise, quadplex, or duplex, but have struggled to agree on a term describing one of those residences.

OK, assume that I finally get this distinction. I'm afraid to ask if there are any other similar things that I should know?

Yes, and thanks for asking. This article doesn't allow enough space but let's debunk a few other things:

  • The condominium owner owns his or her unit with a fee simple ownership. Do not use the term fee simple to distinguish between a condominium and non- condominium home.
  • All condominium units are not created the same. The principle of air space died a long time ago. For example, there are condominium properties where the ground around a single family home is actually part of the condominium unit. In today's world, only the governing documents offer insight as to the definition of a unit for that specific condominium property.
  • There are very few universal principles when it comes to condominiums - such things as ownership, access, maintenance/replacement, and insurance. Here, applicable state statutes and the governing documents are the best guide. Please don't assume that what you have experienced with all of those aspects in one or two condominium associations will apply to another one across the street. (This principle is even more pronounced in the planned community/homeowner associations.) Two of the principles that are most common with a condominium are that the condominium association is responsible for the replacement of the structural common elements and must buy property insurance for the common elements and the units.

Now, the next time you have to complete some application or form asking if your association is a single family home, townhome, or condominium, you will know the entity that created the form doesn't understand this association world too well, When a relative tells you he or she just bought a condominium, you now know to ask more about the home before assuming it is a single floor residence in a vertical building. Armed with this perspective, you can now help others appreciate this distinction about the term condominium ". Please help spread the word!

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Source: Association Times
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