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If you have never owned a condo before the underlying principals of condo ownership may be confusing to you. Here in Michigan we use the word condo to cover some of the following types of properties......townhouses, condominiums, and detached condos. We do not include site condos or co-ops as they are different.
1. A Type of Ownership
- Condominium is a just a form of ownership of real estate.
- Each unit owner of a condominium has individual title to the space inside his unit, plus an undivided interest in the common elements, which are owned jointly with the other condominium unit owners.
- The individual space may be described as beginning with the paint on the walls. You own the inside of the building. Though you may not alter the inside if it affects the structure of the outside. You may need permission to do alterations inside, check your condo association rules and regulations.
- The common elements include the physical components of the buildings, walkways, amenities and land. Which means the outside of the building, porches, balconies, roofs, sidewalks, roads, grass, clubhouse, etc.
2. Not a Type of Building
- Condominium type of real estate ownership is not limited to certain building designs. Many times they are converted apartment complexes.
- A condominium may be an apartment, duplex, townhome, or homes with individual yards.
- In apartment style projects it is obvious that the unit owners do not own parts of the land individually.
***In Michigan we have site condos. They are individual homes that the condo association takes care of the roads. However, this is not a true condo.
3. An Undivided Interest - you have an interest in the roads, the grass, the sidewalks, the club house. You own it but you can't take possesion of it. You can not claim that a certain section of the condo complex is yours, or a certain sidewalk is yours. You cannot even claim the yard behind your unit. It is owned by everybody, however some condos have fenced areas or yard that include decks and patios that the unit owner has full rights of usage too. Everybody has a right to use everything according to the rules and regulations. Even your front sidewalk belongs to everybody.
- A condominium may be built as two units of a duplex.
- In this case, the two owners may decide that each one will maintain his own side, and each will have a fenced yard.
- However, this does not mean that each unit owner owns a divided share of the land and buildings.
- Their interest in the whole site and structure is undivided.
- By setting up the units of a duplex as condos, the developer is able to sell them to two different owners.
*** sometimes some condo have fenced private yards for the owners. It still is a common area, but they have allowed all the owners to create a private space to enjoy the outdoors. The grass and bushes trimmed is still cut by the asssocition.
4. Common Areas
- A condominium association board is often elected to handle repairs and administrative work related to the common areas. They set up the budget, take bids for work, and hire the contractors to take care of the maintenance of the condo. They try to plan for long range repairs of the association, such as roof replacement, or road repair.
- Normally, each unit owner pays fees for common maintenance.
- The association holds an insurance policy covering the jointly owned areas, while individual owners carry insurance for the interior components of their units. The association has a master policy covers that cover fire, and other damages, and a liability policy. The condo owner should get a policy that covers their personal belongings in the house.
5. Greater Density
- The creation of a condo association allows the developer to build more homes in a smaller area than would be allowed for single-ownership lots. In many Michigan cities a home must be 10 foot from the lot line. With condos they can be built side by side.
- This is the reason why the condo association is done instead of a development with single ownership lots.
6. Rules and Regs
- No assumptions should be made about how a condominium is managed and what is covered by the common budget.
- Each condo project has its own specific rules. It is very important to read the condo documents carefully.
- Usally Michigan real estate contracts have an addendum for condominiums. The condo addendums requires that the buyer be given a copy of the condo documents (i.e. the master deed, the condo rules and regulations), with some time to review them.
- During the document-review period, the buyer may terminate the contract without penalty. Usually the period is 5-10 days.
7. Review Documents
- The rules are the rules. Don't think you can move into an association and break the rules. Simple items as flag poles, basketball hoops, porch decorations may be banned. If you break the rules you may be fined be day. The fine can become a lien against the property. You will lose any court battle if it is in the condo rules and regulations. So if you don't like the rules DO NOT BUY THE CONDO.
- During the document-review period, you the buyer may terminate the contract without penalty.
8. Banks do a condo questionaire
- If you are getting a mortgage most likely the bank you are getting the mortgage from is going to ask the Condo association to fill out a questionaire. The questionaire usually asks about condo reserves and if the condo is being sued or has a judgement against them. The bank wants to make sure the condo association is solvent before they loan money to buy one of them. But don't make an assumption on the bank doing your work for you.
- Take a look at the complex. Is it kept up well? Do the roof or roads need repair or going to need repair. Get the phone number of the board, and call the associations. Ask questions about the reserves to repair the complex. Are they planning major repairs? Is there enough money to do the repairs or will they have to do an assessment.
*** An assessment is when a major repair has to be done and there is not enough money in the complex reseve fund. The board will take the cost of the repair and divide between all the owners. Usually this happens because of poor planning, and budgeting of the association. Sometimes the owners don't want to raise the monthly dues, so an assessment is necessary.
9. Who Handles What
- The condo documents spell out which repairs will be handled by the common budget.
- In some cases, the association may maintain all exterior components, decks, pools, sidewalks and driveways.
- In other cases, the individual owners may be responsible for their own windows, decks and exterior painting. Check what you will be responsible for.
10. Ask Questions First
- Make sure you have a clear understanding of the responsibilities of the condo association and the individual unit owners.
- If you have a question, the condo board itself is the best source of answers.
- The board members can give you their interpretation of the rules and clarify how the issue has been handled in the past.
- You might also ask a real estate attorney to review the documents.
- Neighbors, Realtors, or maintenance people are not reliable sources for interpretation of condo documents.
- Before buying a condo, be sure to review the documents, and don't be afraid to ask questions!
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