Condominium

A condominium is a common interest community in which parts of the real estate are designated for separate ownership and the rest is owned in common by the owners of those parts. The Uniform Common Interest Ownership Act, a model act that many states have adapted, defines it that way and adds the test that distinguishes it from every other arrangement: a common interest community "is not a condominium unless the undivided interests in the common elements are vested in the unit owners." Ownership of the shared property sits with the owners themselves rather than with a corporation.

Federal law uses the same architecture. Under 15 USC 3603, a condominium unit is "a portion of a condominium project designated for separate ownership," and common elements are "all portions of the cooperative or condominium project, other than the units designated for separate ownership or for exclusive possession or use." HUD's own handbook describes a condominium development as created by state or local law and "characterized by fee-simple ownership of a unit, which is defined in the condominium documents, together with common areas." Note what none of these definitions mentions: height, style, or whether the building is a tower, a garden complex or a row of houses. Condominium is how the property is owned, not how it is built.

The unit boundary is the single most consequential line in the documents, and most owners have never read it. The declaration defines where a unit stops. The model act supplies a default for the common case where the declaration simply names walls, floors and ceilings as the boundaries: all the finished surface materials, meaning lath, wallboard, plaster, paneling, tiles, wallpaper, paint and finished flooring, are part of the unit, and everything behind them is common element. So under that default an owner's property begins at the paint and the tile, and the studs, the slab and the structure are shared.

A second category sits between the two and explains most of the confusion about balconies. A limited common element is common property allocated for the exclusive use of one unit or a few. The model act assigns shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios and exterior doors and windows serving a single unit to that category when they sit outside the unit's boundaries. It does the same for the portion of a chute, flue, duct, wire, conduit or bearing element that serves only one unit, while any portion serving more than one unit stays fully common. That is why an owner can have exclusive use of a balcony they do not own, and why responsibility for repairing it is a question about the declaration rather than about who stands on it.

The boundary also decides where one insurance policy stops and the next begins. The association carries a policy on what it is responsible for, and the owner insures the unit as the documents define it, which is why the same loss can fall on either side depending on where the declaration drew the line and on what the documents say about improvements an owner has made. The mechanics of how those policies pay belong with the policies themselves. The point here is narrower and often missed: the coverage question is answered by a property document, not by an insurance document.

Allocated interests are the other half of what a unit is. Under the model act a condominium unit carries three of them: an undivided interest in the common elements, a share of the common expense liability, and a portion of the votes in the association. The declaration must allocate all three to every unit and must state the formulas used to establish the allocations, and those allocations may not favor units the developer owns. Except for rounding, the shares must sum to the whole. Nothing requires the formula to be equal shares, and in many buildings it is not: a larger unit can carry a larger share of the expenses and a larger vote than a smaller one. An owner working out what a budget or a ballot means for them starts from their own allocation rather than from the number of units in the building.

Two comparisons are worth drawing because the words are used loosely. A housing cooperative is a different ownership form: the corporation owns the real estate and a member holds shares plus a right to occupy, which changes the financing and the resale process, and the Real Estate guide covers that comparison in full. A townhouse is an architectural description, a house sharing walls with its neighbors, and says nothing about ownership: the same row can be built as condominium units or as separately owned lots inside a planned community. The model act's own commentary contemplates a townhouse project structured as a condominium and discusses where its unit boundaries might sensibly be drawn. Ask what the deed conveys, not what the building looks like.

A condominium is created by recording a declaration under state law. That document describes the units and their boundaries, identifies the common elements and any limited common elements, allocates the interests to each unit and states the formulas used, and establishes the association that will administer the property. A buyer acquires a unit by deed, and the allocated interests travel with it automatically.

A hypothetical allocation example. Rosa buys in a 40-unit building whose declaration allocates interests by relative unit size. Her unit is allocated 2.8 percent. The association's approved common expense budget for the year is $840,000, so Rosa's share is $23,520 ($840,000 multiplied by 0.028), which is $1,960 a month. Her neighbor in a smaller unit allocated 1.9 percent owes $15,960 for the same year, in the same building, for the same shared property.

The allocation does the same work on the ballot. Rosa's vote is 2.8 percent of the total rather than one fortieth, which would be 2.5 percent. In a building where allocations vary widely, the owners of the largest units can control an outcome that a headcount of owners would decide the other way. Both numbers come from the same line in the declaration.

And a hypothetical boundary example. A pipe inside a bearing wall bursts. The pipe serves several units, so it is common element and the association's responsibility. The wallboard, paint and finished flooring damaged inside Rosa's unit sit on her side of the default boundary. One event, two responsibilities, decided by a document recorded years before either party bought.

Pros

• Ownership of a unit is real property held in fee simple, which is financed and conveyed in the ordinary way rather than through a corporation.
• Shared costs are shared. Roofs, lifts, grounds and exterior maintenance are an allocation rather than a bill landing on one household.
• The undivided interest in the common elements belongs to the owners, so the shared property is not held by an outside entity.
• The form makes ownership possible at price points and in locations where single-family ownership is not, which is much of its purpose.

Cons

• What you own is narrower than it appears, and the line is set by a document most buyers read once, quickly, at closing.
• Common expenses and votes come from a formula rather than from equal shares, so influence and cost are not evenly distributed.
• Decisions about the shared property are made collectively, which means an owner can be bound by, and billed for, a decision they opposed.
• The condition and finances of the whole project affect an individual unit's value and financeability, regardless of how well that unit is kept.
• Limited common elements such as balconies and windows create genuine ambiguity about repair responsibility unless the documents are specific.