Condominiums, townhouses or cooperative apartments are three
forms of attached housing, or homes that share common walls and
common areas with neighbors. This type of housing is popular and
essential in expensive real estate markets where only a small
percentage of households can afford to purchase a house.
Condominiums are beginning to proliferate in less-populated
areas, too, as alternative retirement housing for active adults.
Here's a quick comparison of the three:
| |
Condominium |
Townhouse |
Cooperative |
| What it is
|
Single unit that usually
resembles a finely finished apartment. Found in large and
small, high-rise or low-rise complexes |
Two-floor unit that shares a
common wall with at least one other townhouse, found in
clusters (also known as rowhouses) |
Single apartment unit owned as
shares in a corporation, partnership or trust that holds
title to building |
| Ownership
status |
Owner has title to interior
space of unit and shares title to common areas in complex
|
Owner has title to unit and land
under unit and shares title to common areas (if any)
Some ownership arrangements more closely resemble those of
condominiums |
Owner has proprietary lease to
live in unit and corresponding number of shares in
cooperative corporation that owns building |
| Governed by
|
Condominium board of directors
(elected by residents) in accordance with bylaws and
covenants, conditions and restrictions |
Homeowners' association, in most
cases (elected by residents) |
Board of directors (elected by
residents) |
Know Your Condominium
Before you buy a condominium, research
the project by yourself or with a real estate attorney. There
are several documents you'll want to review carefully before you
sign any kind of purchase contract. These papers should be
available from the condominium board of directors or its
representative:
- Master deed
This key document establishes the project as a condominium
project. It gives residents the authority to form an operating
association and includes the legal descriptions of all
individual units and common areas.
- Bylaws
Bylaws are the operating rules for the condo association.
Among other things, they authorize the board of directors to
create a budget, assess fees, hire professional management
staff and perform other operating duties.
- House rules
House rules govern what owners can do in common areas.
- Covenants,
conditions and restrictions
Private restrictions on the use of project property; usually
created by the developer.
- Purchase agreement
This is similar to a standard purchase. It should include a
cooling-off period during which you can back out, and
financing and inspection contingencies.
- Other papers
You may also ask to see current operating budget, current and
proposed assessments, financial statement of the homeowners'
association and any leases, contracts, blueprints or other
design plans.
Know Your Co-op
Some cooperatives are run like families,
but most have budgets and rules that you must follow to the
letter. Some cooperatives prohibit renting; others do not allow
pets. Make sure that you can live with the restrictions before
you buy.
- Co-op rules
Review all of the co-op rules, including membership
regulations and house codes.
- Legal documents
Check the legal documents including incorporation, bylaws and
proprietary lease.
- Budget
Examine the financial statements and the operating budget of
the cooperative.
- Legal issues
If you are confused by the legal jargon, ask a lawyer who
specializes in cooperatives.
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WARNING SIGNS
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More than 50 percent of the
units are rentals. Upkeep may be poor and some
lenders will not make a loan on a unit in the complex,
which may reduce your investment's long-term value.
|
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The condo association
doesn't have a healthy reserve fund. Members may
have to pay a special assessment to cover the cost of
major repairs. |
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Members of the board of
directors don't get along with each other. If they
can't agree they will make poor decisions for everyone
else. |
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The project is heavily
involved in litigation. Lawsuits with builders and
other homeowners can sap reserve funds and affect resale
value. |
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