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The term condominium, condo for short, is a commonly misunderstood word. A condo describes a method of owning real estate, not a particular style of building. A single condo is one housing unit within a larger complex of units, and a condominium complex is used to describe the collection of all units within the same development. The type of unit could be an apartment, a townhouse (which is sometimes referred to as a row house), a detached home, or any other multi-unit property.
When you buy a condo, what you actually own is the inside of the unit itself; all unit owners own everything outside of their unit, proportionately and collectively. For example, you as an owner of a unit and all the other unit owners collectively own hallways, stairs, pools, recreation centers, grass areas, etc.
Since all unit owners collectively own anything that is outside of the individual units, all owners must provide funds to maintain these common elements. In most communities, owners elect members from their ranks to form a Condominium Association (CA), whose charter is to establish a budget, collect dues from unit owners, manage the repair and maintenance of common elements, and to oversee the affairs of the community. Many CAs hire Property Managers to undertake these functions, but the responsibility and accountability remains with the CA.
The Condominium Association is responsible for determining the amount of money needed to manage the affairs of the community. In addition, the CA must maintain sufficient funds in reserve to address any emergency costs and to prepare for larger maintenance projects that occur less frequently (e.g. replace all roofs in the community). Based on anticipated expenses and the need for reserve funds, the CA sets the amount of the monthly “condo fee,” which must be paid by all unit owners. The CA can also impose special assessments on the owners if unforeseen expenses are incurred.
Condos offer a variety of benefits to their owners. For example:
- Condos tend to be less expensive than real estate owned by other methods.
- Many condo communities offer amenities such as pools, tennis courts and recreational facilities.
- There is no hassle or expense of personally maintaining a yard or others structures outside of your unit.
While condos tend to be less expensive than other forms of real estate ownership, there are also drawbacks.
- Condo units may be connected to one another, which increases the chance of hearing noise from adjoining units.
- Condo owners may not have a front or back yard.
- Unit owners must share available resources such as the pool, tennis court, recreation center, etc., with all other residents.
- The monthly condo fee mentioned above can increase as the price of goods and services increases.
Because of these drawbacks, many buyers shy away from purchasing a condominium.
As mentioned above, the elected Condo Association is responsible for the affairs of the community. This body typically meets monthly and has the authority to pass actions that impact all owners with regard to the amount of monthly dues, the community rules, etc. The members of the Condo Association are typically elected annually, although this can vary from community to community. Since management of the Condo Association is a democratic process, it has all the peculiarities of any political body. Therefore, most owners find it beneficial to attend all monthly meetings, so that their voices are heard.
The authority of the CA and other rules of a community are usually detailed in a document called the Covenants, Conditions and Restrictions (CCRs). The CA also maintains the minutes from its meetings and a record of any new regulations that passed. The CCRs are unique to an individual community and define the parameters and obligations of owning a condominium within that community. Prospective buyers should carefully review the CCRs and other CA documents. and seek professional legal and financial advise before buying a condominium.
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