A condominium, or condo, is a type of housing wherein a very specific part of a larger property — almost always an apartment within a complex — is privately owned by the homeowner, while all other connecting areas of the complex are communally owned by all condo residents. Townhouses, or townhomes, are individual houses that are placed side-by-side, where one or two walls of each house are shared between adjacent homes. Condos generally have higher HOA fees and are smaller, while townhouses have lower HOA fees are built with more square footage. Both types of housing are found more frequently in urban areas.
The most common configuration of a condo is that of an apartment within a complex. What makes an apartment a condo is the fact that someone can own the interior space of that apartment and jointly-own the spaces outside of it (e.g., halls, exercise rooms, parking lots or garages, pools, the building's roof). Sometimes an independent office within a multi-unit complex is also called a condo, but this is less common.
A townhouse is not an apartment, but a house built within a row of connected houses. Most townhouses are built more narrowly than traditional detached homes and are usually two- to three-stories tall. Depending on where it is in the row, a townhouse shares one or two walls with the other homes. Most have a small backyard and frontyard. With their connected walls, townhouses share some characteristics with duplexes and triplexes.
In a complex of condos, homeowners communally own common areas and all exteriors. These areas are kept clean and in good condition with the money brought in by HOA fees. Even the roof of the complex is communally owned.
Townhouses usually have fewer common areas. Though townhouses share one or two walls, they are considered individual and independent homes, usually with individual yards (that may be fenced) and carports/garages. Very little is jointly owned. However, in some cases townhouses may be part of a larger neighborhood which has a communal area, such as a small playground, pool, or park.
No land is owned in a condo. Instead, it is the space inside the apartment that is owned. In contrast, those who own a townhouse actually own the land their home is built on. Both condo owners and townhouse owners must pay property taxes.
Homeowner Association (HOA)
A homeowner association (HOA) — sometimes called a condo association — is a corporate body with an elected executive board that manages and maintains standards and amenities within a complex or neighborhood. HOAs take in monthly or annual fees and have community meetings where homeowners they cover attend and make decisions regarding the complex or neighborhood.
Some HOAs are small, have low monthly or annual fees, and relatively little power and few restrictions. Others HOAs are large, have high fees, and maintain a multitude of rules, issues, and features both big and small. When a person buys a home that is covered by an HOA, he or she has no right to reject membership. Membership is required, as are the associated HOA dues.
Condos almost always have higher HOA fees than townhouses do. This is because condos have more shared spaces and often some unique amenities, such as an exercise room or rooftop barbecue, which require more money to cover. Water, cable or DSL internet service, some insurance coverage, and other services or utilities may also be included in a condo's monthly HOA fees. Townhouses often have HOA fees as well, but they are usually much lower and often only cover a small set of services, such as waste service and lawn care.
Maintenance Under an HOA
Condo associations generally cover many more maintenance issues than townhouse HOAs do. While much depends on the fee structure and size of the HOA, good condo HOAs handle maintenance in many of the same ways that large rental apartment management companies do: by fixing problems within a condo (e.g., a leaky faucet) and by maintaining common areas and exteriors. For example, grounds are maintained by gardeners and roofing is replaced as needed by professionals, all paid for with money taken in and held by the HOA.
Townhouses often require a lot more self-maintenance or the private hiring of professionals to fix problems that eventually arise. A townhouse may or may not have an HOA at all, and those that do are less likely to cover grounds upkeep or even major maintenance concerns, like roof replacement. However, there are exceptions to this, so asking after what a townhouse's HOA covers is paramount.
HOA Rules and Regulations
Before purchasing a condo or townhouse, potential buyers should ask for a copy of the HOA's meeting minutes, financial statements, and rules and regulations, the latter of which are often known as CC&Rs (covenants, conditions, and restrictions), but can go by a variety of names. Depending on the HOA, these documents can make for a lengthy read — up to 50 pages, all together — but they are important. They tell buyers how restrictive life may or may not be under the HOA, how financially sound the managing body is, and how often (and by how much) HOA fees have increased over time.
There is no set standard for HOA rules. Every board votes on issues and guidelines for individual communities. However, there are some common rules and regulations among most HOAs. They include the following:
- Common area rules: hours common areas are open, rights and restrictions regarding using them
- Pet restrictions: whether pets are allowed, what animal species are allowed, breed restrictions, weight limits, how many pets can live in a single unit
- Trash/recycling rules: how, when, and where to place trash and recycling
- Decoration restrictions: whether signage, Christmas lights, etc. are allowed in windows or on lawns
- Grounds restrictions: Townhouse owners may be restricted from drastically (or even slightly) changing the landscaping of their front yards. They may also be restricted from changing paint colors, mailbox styles, etc.
Safety and Privacy
The safety and privacy of a condo or townhome depends on the structure. Some condos are very secure, offering advanced security features, such as electronic door lock systems and video surveillance in common areas; other condos are not developed with top security in mind. Townhouses come with many of the same security features (and issues) that a traditional detached home does. Of course, most safety depends on the location.
Condos do have one safety concern that townhouses do not — at least not to the same extent. Condos, like any home, can be bought, rented out, or resold, meaning good and bad neighbors come and go. Having bad neighbors is a concern that exists with any close-quartered apartment living; the difference is that a condo is a more serious investment that is harder to get out of if the quality of one's neighbors declines.
In terms of privacy, condos and townhouses may or may not seem private. For those easily bothered by noise, it is wise to ask about how thick the shared walls are and to even talk to neighbors before purchasing a condo or townhouse. Some infrequent noise (e.g., an occasional party) is to be expected, but everyday movement should not be easily heard in a condo or townhouse that is built well.
Pros and Cons
For those who enjoy city living, a condo or townhouse can be a good fit, especially for first-time homebuyers. Not having to worry about exterior work, like gardening or landscaping, or roof replacement, makes condos ideal for some, and having access to certain amenities is a bonus for many. Similarly, having a small yard in which to sit or garden in is a townhouse selling point for those who want some features of a traditional detached home but still want a more urban living experience.
There are potential drawbacks with condo and townhouse living, however. Condos and townhouses can be expensive to own — especially condos — and depending on how an individual HOA functions, they may or may not feel as though they are worth the money spent. Some also find the restrictive nature of an HOA frustrating, wishing instead that they could do more of what they would like without having to consult neighbors (in which case a detached home that isn't connected to an HOA is the best solution).
In the U.S. and most of Canada, condominiums are governed by specific federal and local laws. Townhouses, however, are often governed by the same laws that apply to detached homes (a.k.a., single family homes).
As with all real estate costs, location determines the greatest portion of a condo or townhouse's value, but there are many expenses to consider. HOA fees and what they cover should be taken into account, as should property taxes, any and all insurance expenses, and (especially in the case of a townhouse) home inspection costs. The mortgage interest rates for buying a condo are also usually higher than those for buying a townhouse or detached home; making a down payment of 25%, rather than 20%, can help mitigate this, but it's a high upfront cost.
Evaluating HOAs takes effort. It is very important not to assume anything about a particular HOA until all of its documents have been read, as this is one area where a homeowner can save a lot of money. Fees, be they high or low, are not a consistently clear indicator of whether an HOA is good or not. Some condos and townhouses might have low HOA fees that ultimately mean few services are offered or, worse, the services offered are no good, making monthly or annual fees wasteful expenses. Other condos and townhouses might have high fees that cover many services and amenities and ultimately save money as the HOA may have special deals with local service providers.
If HOA fees are significantly higher than those found in similar places nearby, or if a condo complex has more renters than owners, reselling a condo may be difficult. Moreover, condos appreciate more slowly than townhouses or detached homes that are more suitable for families, so it may be some years before a condo gives a good return on investment — if it ever does. Thoroughly research the local housing market before buying a condo or townhouse to rent out or resell.