Condominium and Fee Simple
Ownership of Real Estate
By: Roselind Hejl
Real Estate Ownership
Generally, apartment-style buildings are called condos, two-story row houses
are known as town homes, and free-standing homes on small lots are referred
to as garden homes. Unfortunately, this description creates some confusion
about real estate ownership. Apartment, town home, and garden home describe
the design or construction of certain homes. The word "condominium" does not
refer to a the layout or style of a building. Condominium is a form of
ownership of real estate. The form of ownership of real estate cannot be
recognized by observing the building design.
Condominium Regime
The legal definition of condominium is: the absolute ownership of a unit
based on a legal description of the airspace the unit actually occupies,
plus an undivided interest in the ownership of the common elements, which
are owned jointly with the other condominium unit owners. Each unit owner of
a condominium has individual title to the space inside his unit. The space
is sometimes described as beginning with “the paint on the walls.” In
addition, each unit owner has an undivided interest in the physical
components of the condominium buildings and land.
A popular type of condominium development is the multi-story apartment. In
this case, there is no land under each unit. In these developments, the
condo association usually handles maintenance of the building exterior and
common grounds, while the unit owners maintain the interiors of their units.
A condominium association is selected to make decisions about expenditures
for repairs, and to handle administrative work related to the common areas.
Fees are collected from the unit owners to pay for common maintenance. The
association normally holds an insurance policy covering the jointly-owned
areas, while individual owners carry insurance for the interior components
of their units.
Condo projects may resemble duplexes, town homes, garden homes, or
residences on regular lots. In general, the creation of a condo regime
allows the developer to get more density approved than would be allowed if
he had done single-ownership lots. This is often the reason why the condo
regime is chosen instead of a development with single ownership lots. A
condominium may be built as two units of a duplex. In this case, the two
owners may jointly make decisions concerning maintenance of any common
areas. By setting up the units of a duplex as two condos, the owner is able
to sell them to two different owners.
Each condominium has rules that are specific to the development, so no
assumptions should be made about their requirements. It is important to read
the condominium documents carefully before purchasing a condo. The documents
specify the maintenance that is covered by the common budget. In one
project, the association may handle exterior components, decks, pools,
sidewalks and driveways. In another, the individual owners may be
responsible for more maintenance of their units, including foundations,
roofs, and exterior walls.
If you have questions about the division of labor between the common budget
and the individual owners of a condominium, you can present your question to
the condo board itself. The board can give you an interpretation of the
rules and clarify how the issue has been handled in the past. Another
possibility is to ask a real estate attorney to review the documents for
you. Realtors, other unit owners, or maintenance workers are not appropriate
or reliable sources for the interpretation of condo documents.
The Texas real estate contract for condominiums contains a provision
requiring that the buyer be given a copy of the condo documents, with a
period of time to review them. During the document-review period, the buyer
may terminate the contract without penalty. In addition, a resale
certificate is must be provided by the association president or manager.
This document provides information on the current budgets, insurance
coverage, special assessments, lawsuits and other matters that affect the
association.
Fee Simple Ownership
In contrast to the condominium regime, you may own real estate by fee
simple. “Fee”, which comes from the word, “fiefdom”, refers to legal rights
in land, and “simple” means unconstrained. Fee simple is the most common
type of ownership. It is the absolute legal title to real property,
including both buildings and land.
In fee simple, there are several different possibilities with regard to your
obligations of ownership:
(a) Your property may not be in a subdivision at all. In this case, your
deed will not include any subdivision restrictions that control your use of
the property. Be aware that there could be some deed restrictions put in
place by previous owners. In addition to deed restrictions, you may be
governed by city or county ordinances or zoning laws that limit your use of
the property.
(b) Your property may be in a subdivision with very few restrictions, no
common areas, no architectural control committee, and no mandatory dues.
Usually these are older subdivisions.
(c) Your property may be in a subdivision of homes on large lots, or in a
town home or garden-home community in which there is a legally created
homeowners association. In this case, every homeowner is required to be a
member of the association. The association may charge mandatory dues and
enforce subdivision rules. A certain level of maintenance may be required of
each property owner. For example, you may need association approval of
exterior paint colors, fences, or additions to your home.
Like the condominium form of ownership, fee simple ownership does not
prescribe how maintenance is handled or how developments are governed. For
example, the owners of a town house, with fee simple ownership, may be
required to fully maintain their units. Or, the owners' association may
cover painting, roofing and yard work for the owners. In subdivisions where
there are single family homes on large lots, it is more common for the
homeowners association to manage the common grounds, pools and parks, while
the individual lot owners fully maintain their own properties.
Understand your ownership rights and obligations
Before buying into a condominium regime or purchasing a fee simple property,
you should have a clear understanding of the type of ownership you will have
in your property. If you are buying a condominium, it would be wise to read
the condo documents carefully and understand how maintenance is divided
between the individual owners and the condominium association.
If your ownership is fee simple, with individual ownership of the land, you
should review the deed restrictions (if there are any) and understand the
restrictions and obligations that apply to your property. In the fee simple
form of ownership, there may be mandatory dues to pay for common area
maintenance, or, in some cases, the dues may be used for partial maintenance
of the individual properties.
If you have a question about your type of ownership or about your
obligations as a homeowner, it would be wise to review the title documents
with a real estate attorney before proceeding with your purchase. Ask plenty
of questions! A clear understanding of your type of ownership, and of your
obligations as a homeowner will result in a more satisfying real estate
purchase.
About The Author
Roselind Hejl, CRS, is a Realtor with Coldwell Banker United in Austin,
Texas. Her web site: Austin Real Estate Guide -
http://www.weloveaustin.com -
offers a wealth of knowledge about the city of Austin, homes for sale,
market trends and the real estate buying and selling process. Top 25
Residential Agents - Austin Business Journal
roselind@weloveaustin.com
[Internet-Marketing-One.Com]
