What Is a Condominium? How Condos Work Compared to Apartments

What Is a Condominium?

A condominium (also called a "condo") is a large property complex comprised of individual units, and each unit is owned separately. Ownership usually includes a nonexclusive interest in certain "community property" controlled by the condominium management.

Condominium management is usually made up of a board of unit owners who oversees the daily operation of the complex, such as lawn maintenance, snow removal, and building updates.

How a Condominium Works

Condo owners are often said to own the "air space" of a unit in a multi-unit development. This means that the condo owner's title to the property does not include the four walls that divide their unit from other units or common areas in the property. The floor, ceiling, sidewalks, stairwells, and exterior areas are all part of the common ownership of the condo—known as limited common elements.

One common type of condominium is a residential high-rise that provides housing for several different families. However, the concept is not limited to high-rise buildings, nor is the concept limited to residential properties. Residential townhouses are sometimes developed as condominiums. Commercial properties can also be condos, such as office condominiums.

Special Considerations 

Condominium developers differ in the ways they provide parking spaces and garages to unit owners. In some developments, these spaces are reserved as limited common areas, and the condo association maintains ownership but gives exclusive rights for the unit owner to use the space or garage.

In other developments, the unit owner buys the garage or parking space and has ownership. However, the covenants, conditions, and restrictions may still limit the owner's ability to sell or rent the space independent of the unit itself.

Condominium vs. Apartment

The big difference between a condo and an apartment is that you generally own a condo, while you rent an apartment. Apartment buildings are usually owned by a single owner (such as a property management company) and the buildings are used solely for rental purposes. However, condos that are rented out to tenants are sometimes referred to as apartments.

Thus, the only notable difference between a condominium and an apartment is ownership. A condo is generally something you own, while an apartment is something you rent. 

Requirements for a Condominium

The declaration of covenants, conditions, and restrictions is a legal document that sets forth the regulations for owners of units in a condominium. This document defines the acceptable use of the unit. It describes the owner's use of limited common areas and general common areas. The declaration includes rules for selecting the board for the homeowners' association. This board manages the development, directs repairs and maintenance of the common areas, and assesses fees.

Unit owners pay condominium fees to the condominium association. These fees generally include the cost of insuring the building, shared utilities, and a reserve of funds for future maintenance of the building. They may also include the fees the association pays to a management company for the daily operation of the development. Condo fees are subject to increase, and if the building requires major maintenance, any costs that are not available in the reserve funds can be billed to the unit owners.

Advantages and Disadvantages of Condos

Purchasing a home is often one of the biggest investments a person will make in their lifetime. Because of the financial, legal, and tax implications, it's important to understand the pros and cons of any real estate purchase, especially a condo.

Advantages of Condo Ownership

Condo living affords its owners several benefits, such as access to amenities that are ordinarily only accessible at a cost. Owners can enjoy the exclusive use of swimming pools, tennis courts, and fitness facilities at no extra cost. Some high-end condos even provide access to spas, rooftop entertainment spaces, and gardens.

Many condo associations employ security services to safeguard their community and protect their residents. This may be as simple as a gate and a doorman in the front lobby. It can also be more complex, such as camera surveillance or patrols by security personnel. Either way, the community benefits from extra eyes warding off would-be intruders and additional peace of mind as a result.

Disadvantages of Condo Ownership

Condo owners are required to pay condo association fees to maintain the integrity of the community. Mostly, the condo fees provide for the maintenance of the property, including common areas, exterior structures, and some interior structures and appliances. Fees can vary according to what the fees support. For major repairs, condo owners may be assessed a special fee to cover the costs. These special assessments can be thousands or tens of thousands of dollars.

Much like apartments, condos often share common walls, as well as common spaces. Living in close proximity and sharing walls and spaces limits the amount of privacy one can enjoy. In contrast to single-family detached houses, residents must tolerate neighborly nuisances.

In addition, condos are managed by condo associations that impose certain rules and restrictions on owners. The condo association governs how common spaces can be used, to what extent condo owners can make improvements or changes to their units, and sometimes who can enjoy those spaces with them.

The Bottom Line

A condominium, or condo, is an individually owned residential unit in a complex or building of like units. Condo owners own their units but share common spaces, amenities, and other resources. They pay condo fees, which cover maintenance costs, amenities, and the upkeep of common spaces. If major repairs are needed and condo association fees are insufficient to cover those costs, condo owners will be charged a special assessment.

Considering the added fees, owning a condo is generally less expensive than owning a house. There are advantages and disadvantages to owning a condo. Therefore, it is important to understand the implications before committing to purchase one.