What is a “Condominium” anyway?

Condominiums are a bit more complicated than traditional houses or even attached town homes. Although houses and attached town homes often have an HOA (Home Owners Association), they have a very traditional ownership structure in which the owner of the property owns the structure and the ground underneath it as well as any defined “yard” on the legal lot. The homeowner is responsible for all maintenance and repairs inside and out as well as most if not all of the yard work. In single family detached neighborhoods that have an HOA, the HOA is often an enforcement entity enforcing CC&Rs (deeded covenants, conditions and restrictions) for the neighborhood and maintaining common areas like a park. Many home buyers try to avoid neighborhoods with an HOA because of concerns they will be limited in how they use their property. HOAs in detached neighborhoods are a blessing and a curse, but in urban properties it is much more a blessing than a curse.

Condos have a special if not somewhat unique ownership structure. Dating back to 1960 in Salt Lake City, the first condominium project was built. And over the years laws have been put into place to regulate the industry. Every state is different but in general the broad idea spans the nation. A condominium owner has two types of ownership. The interior space is wholly owned in fee simple like any other property. The owner is fully responsible to maintain everything inside the unit including interior plumbing, fixtures, interior electric, appliances, flooring, paint etc. The owner further has complete control of the interior to use as they see fit aside from any activity that threatens the structure or the rights to use of other units. Secondly the structure itself, often a multilevel building and any land underneath the structure and/or grounds are jointly owned by all the homeowners collectively. This is where the HOA comes in. Typically the HOA is run by an elected board often consisting of individual homeowners.

In many cases urban condos in high rise buildings often have the HOA run by a management company as high rise urban buildings tend to have more complex HVAC systems and plumbing sometimes collective systems for the entire building. The HOA is funded by home owners that pay a monthly fee (sometimes quarterly or even annually, but in urban condos typically monthly). That fee is used to provide the regular maintenance of all common areas such as a lobby, workout room, pool or any other common areas collectively owned. Some of those funds will be kept in a reserve account designed to pay for expensive long term maintenance such as replacing siding, roof, or other high cost long term repairs and maintenance. The HOA also pays for fire and hazard insurance for the structure, but the homeowner typically pays to insure the interior space and the contents within.

Condos provide homeowners with the advantages of equity ownership and the convenience of an apartment. Although interior maintenance is the homeowner’s responsibility, the exterior and structural is maintained by the HOA. This eliminates a fair amount of homeowner maintenance in both cost and time.

Buyers should be mindful of how well run the HOA is. Information about the HOA and its financial standing are available to prospective buyers and should be closely examined before making a purchase. Should a significant repair be needed that the HOA is unable to fund, the homeowners will likely be assessed either a substantial lump sum or an steep increase in periodic dues to offset the shortage.

Here in Vancouver there is a fair bit of mixed used buildings some of which include housing. Two notable condominium projects downtown are sitting on top of office buildings. Viewpoint at Vancouver Center has four floors of luxury view condos sitting on top of a seven story class A office building. Likewise the Frontier Block at 500 Broadway has two floors of luxury condos sitting on top of four floors of class A office. These multi use buildings have some additional complications to the HOA structure, but often to the benefit of the homeowners as the office building is usually owned by one entity that handles the bulk of building maintenance. The office section tends to be the majority of the structure in these building arrangements. However close examination of HOA documents is always well advised.

Where HOAs in suburban detached home neighborhoods have advantages offset by disadvantages, urban properties in high rise buildings really don’t have as many negatives as the lifestyle is more apartment like and the exterior uses limited anyway. Condo’s offer the equity advantage of home ownership with the convenience of an apartment; for many this is an ideal situation.

This week the listed condo inventory contracted slightly with two closed units and no new listings. There were two minor price reductions.

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