What Your Legal Responsibilities as a Condo or Townhome Owner?

Condos, co-ops, townhouses – home shoppers have a range of multifamily housing options. These terms don’t mean the same thing, even though they sometimes get used interchangeably, causing confusion for homebuyers.

It’s often hard to understand what hosing type you’re purchasing, and your rights and responsibilities you will have as an owner, unless you delve into the package of documents the developer gave you to understand the legal lingo.

You may be surprised to find out, for example, that the single-family detached home you’re buying is a condominium. Or that you’ll own the attached dwelling your developer calls a “townhouse” in fee simple. There are numerous types of hybrid developments, most subject to specific restrictions. Without reading the disclosure documents, you can’t possibly understand your rights and responsibilities as an owner.  

“Buyers of new homes need to pay attention to what they’re buying so that they’re not surprised later,” says Mark F. Grant, a condominium and planned development lawyer in Fort Lauderdale, FL. “They need to understand the documents governing what they’re buying into, but they are inches thick and very difficult for a layperson to read and understand.”

What could happen if you don’t review these documents or work with an attorney who does? Well, you might not realize there’s a restriction on pets in the community or that you can’t keep your truck in the driveway overnight. You may not know that your window coverings need to be a certain color or that you can’t paint your house or plant flowers. And you might be shocked to find out after the closing that you owe thousands of dollars in special assessments to the homeowners or condominium association.

And, just because the developer’s sales associate tells you something – like dogs are allowed — doesn’t necessarily make it so.  

“Right on the cover of a prospectus in Florida, in big bold letters, is that oral representations cannot be relied upon,” Grant says. “The salespeople are there to sell units. Even if a salesperson tells you something, the contract embodies everything, and nothing else applies.”

The bottom line, at least in Florida (and many other states) when it comes to buying real estate: If it’s not in writing, it doesn’t count.

Forms of Ownership: What’s the Difference?

While there are regional differences in some of these terms, here’s a basic look at of the most popular forms of ownership for residential real estate.

Fee-Simple Ownership

Most common for single-family homes. The owner has title to not only the house but also to the land it sits on. Owners in fee simple may still be subject to restrictions if their property is located in a planned unit development or governed by a HOA.       

A Condominium

The buyer owns the interior of a multifamily unit, along with an undivided interest in the common areas of the project (such as the walls, hallways, pool, etc.)

Cooperatives

Multifamily housing typically less common than condominiums. Owners of co-ops actually own stock in the corporation that owns their building, and they receive a proprietary lease that gives them the right to occupy their particular unit.  

Hybrid Forms of Ownership

Sometimes townhouse developments have hybrid forms of ownership, the units can be fee simple or condominium ownership. Single-family homes can also be condominiums. There are even more complicated hybrids, such as mixed-use developments that contain residences, retail and hotel space. “We set these buildings up as what we call vertical subdivisions,” says Grant. “We divide the building up vertically into cubes of air space. The buildings are not condominiums – the ownership is fee simple of those cubes of air within the building.”

Doing Your Due Diligence

It’s essential to understand before you sign a real estate contract exactly what you are buying. That’s because your home can come with obligations and restrictions, and the consequences of not knowing what they are upfront can impact your use of the property. After all, you don’t want to learn there are restrictions in the community by receiving a violation letter from the association.

According to the Foundation for Community Association Research, 61 percent of all new housing built for sale is located in a community association, such as a homeowners association or condominium community. Today, 70 million residents reside in 344,500 community associations throughout the nation — so a large part of the homeowning population lives under the watchful eye of a community manager.

What should you do before purchasing a home in a community association?

Hire an Attorney

This is perhaps the most important step to take to protect your interests. After all, your home is likely the most expensive investment you will ever make, so getting some legal advice makes sense. It’s not likely you will read the complete package of disclosure documents, but your attorney should at least review the restrictions on your behalf and advise you of any that might affect you.

Review the Association Budget Carefully

Make sure the Condo association is properly reserving for future expenditures and emergencies. Be aware that if you are purchasing a new home, it’s not uncommon for developers to underestimate budgets and that monthly assessments may rise when homeowners take control of the association.

Work With a Knowledgeable Local Real Estate Agent

That agent may be able to warn you about careless management by the board of an existing community or about upcoming special assessments for which you may be liable.

Don’t Be Afraid to Ask Questions

“You’re not just buying a home – you’re actually investing in a business,” says Thomas Skiba, chief executive officer of Community Associations Institute, a nonprofit trade association for community associations. “Even though it’s not for profit, it’s still a commercial enterprise.” Ask your sales person the right questions, so you can buy the perfect new home.