What is the Difference Between a Condominium, a Townhouse and a Co-op?

Janice Carpi is National Underwriting Counsel at GRS Group
jcarpi@grs-global.com

Purchasers of condominiums, townhouses or co-ops are often confused when they are looking to buy units in one of these developments, because they don’t know the difference.  This week, I will do a very basic explanation of the three different types of ownership.

A condominium is a development of real property where the individual apartments, often called “units”, are part of an overall development created pursuant to state statutes.  Condominiums can be high-rise or low-rise buildings; they can be developments built specifically as condominiums, or they can be an older apartment building that has been converted into a condominium regime.  A condominium development is generally made up of three different kinds of space:  the individual units, the “limited common elements” and the “general common elements”.  The units are made up of the interior space of a particular part of the building.  This interior space is what is inside the four walls of the unit.  No other unit owner has any interest in this space.  The condominium development will also have general common elements,  which are the areas used by all the unit owners, like the stairwells, elevators, parking areas, landscaped areas, pools, etc.  Each unit owner generally owns an undivided interest in the general common elements according to the percentage that the unit-owner’s individual unit bears to the total development.  For example, if there are 100 units in the condominium, and each unit is the same size and dimension of the others, then an individual unit owner will have a one percent (1%) share of the general common elements.  (1 unit out of 100 is 1%).  Limited common elements are parts of the development that, while not owned by the unit-owner, are attached to an individual unit, such as a balcony, patio or parking space, and are for the sole use and benefit of the unit-owner to whom the limited common element is assigned.   A conveyance of a condominium unit will look like this in a deed:  “Unit 205 of Sunny Acres Condominium, according to the Declaration and Covenants of such condominium recorded in the Land Records of Sunnyvale County, Utopia, together with a 1.35% interest in the common elements as set forth on said Declaration.”

Condominiums are operated in accordance with a Condominium Declaration and By-Laws that are recorded in the land records, and which set out the procedures that guide and enforce the various rights and obligations of all the unit owners.  The Declaration and By-Laws provide for a Condominium Association, elected by the unit owners, to deal with the day-to-day issues that always arise when dealing with a small community.  Condominiums require each unit-owner to pay a monthly assessment for the general maintenance and upkeep of the condominiums, which includes things like keeping the roof in good shape, painting and repairing the exteriors, maintaining any pools, elevators, and grounds, as well as payment for property and casualty insurance for the general and limited common elements.  Depending on the age, design and amenities of the condominium development, these fees can run anywhere from a couple hundred to over a thousand dollars a month.   Failure of a unit-owner to pay the assessments will usually result in a lien being placed on the unit.

The term “townhouse” can mean different things to different people.  The kind of townhouse development that I will discuss here is not the older style of urban home that is found in the Northeast, which is not part of any development, and does not have any shared common elements.   Townhouse developments, on the other hand,  are similar to condominiums, in that they are part of a planned development, with each owner having shared responsibility for the upkeep and maintenance of the general common areas.  A townhouse will usually look like a small individual home, with its own private entry, stairs and roof.  Townhomes tend to have shared side walls with the neighboring townhomes, and all the townhouse owners in the development may share in the expense of landscaping, parking, and other common elements.    Townhouse developments often have desirable aspects, such as patios or small back yards, storage sheds, or even garages, that may be part of the townhouse conveyed (i.e., a lot as opposed to a unit), or they may be part of the limited common elements  designated for use solely by a particular townhouse owner, depending on how the development was structured.  Townhouse developments will also have some kind of association, declaration, and by-laws in order to maintain and operate the development, and will have the same rights as a condominium to charge and collect fees for these expenses.  A conveyance of a townhouse in a development will look similar to this:  “Lot 6, Block A, of Sunny Acres, a townhouse development, as shown on the plat recorded in Book 7206, Page 83, of the Land Records of Sunnyvale County, Utopia, together with an undivided 2.6% interest in the common elements attached to said Lot 6 according to the Declaration and Covenants recorded in the Land Records of Sunnyvale County, Utopia.”

A Co-op, short for Cooperative, is a different kind of ownership altogether.  In a co-op, an entire apartment building is purchased and turned over to a cooperative association, which owns the land and building.  The cooperative association then sells shares of the association (stock) to a purchaser of a unit.  So a unit owner does not technically own any real estate; instead, a co-op owner owns shares in the association, and those shares are assigned to a particular unit in the building.  All co-op owners share in the maintenance and upkeep of the building and all common areas, such as walls, utilities and the exterior, and the association has the ability to lien the owner’s shares for non-payment of these shared expenses.  Co-ops are common in New York City, and there have been several cases where a co-op Board has refused to authorize the sale of the share to a potential purchaser based on personal likes and dislikes.  You may remember the episodes in the TV show “Sex and the City”, where Miranda wants to purchase a unit in a co-op, but had to first survive an interview with Board members, who ask pointed and personal questions.  For more information on co-ops, I would refer you to a New York realtor or lawyer, who will be more familiar with this type of ownership than I.

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Here’s my usual caveat:  The opinions stated in this blog are those of the writer, and should not be construed to be a statement of fact or conclusion of law.  Any statements herein should not be relied upon in any litigation, arbitration or mediation.  The author does not purport to be an expert in condominium, townhouse or cooperative law, and the statements herein are for general educational purposes only.

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