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 by many who practice in the field of real
estate. As you obviously have interest in community associations
because you are enjoying Association Times, we think
you will find this article of value.
First, forget the idea that a condominium is a
type of architecture, building, or house. Not true. In various
parts of the United State , 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?
Thanks for pointing out the key difference. 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.
