With condos and co-ops, ‘common’ may not mean ‘shared’
5/4/2015 | Real Estate Blog
Not every real estate investor is Donald Trump. And that’s a good thing. Trump’s public persona aside, his reputation is for large-scale developments that only a fraction of individual investors can really afford. In some cases, he may be competing with hedge funds or financial institutions, certainly. The point is, though, that there are other investors out there that would like to build their portfolios slowly or that may just want to see if being a landlord is for them.
With so many buildings in the city converting to condominiums, and so many new developments going up, smaller or neophyte investors may be considering buying one or two units as rental properties. One of the first things they need to understand, though, is whether the development is a condominium or a cooperative. There is a difference.
The definition of condominium can be a little sticky when you’re looking at legal documents. Technically, the word “condominium” describes the form of ownership, not the premises. In legal documents, the condominium is the entire property — say, the old shirt factory. The condo units are the portions of the building — the apartments carved out of the factory space — that are owned individually. This is the area of “divided ownership.”
There is also an area of “undivided ownership” in a condo building. These are common areas like the hallways, laundry room, even garages and rooftop decks. Anything that benefits more than one unit is generally a common area. The common areas are the responsibility of all of the owners together — that is, the condo association.
Because condo units are discreet pieces of property, they are bought and sold the same way a house is. There are a purchase agreement, a mortgage, title insurance and everything else involved with a home sale. The deed is transferred from the seller to the buyer, and the sale is complete.
Sort of. The purchase also includes a proportionate share of the common areas, a stake in the association. The purchase price of that interest, though, is separate from the buyer’s mortgage. This is the monthly fee, the association dues, that condo unit owners must pay.
We’ll continue this in our next post.
Findlaw, “Condominiums and Cooperatives,” accessed May 1, 2015
Pennsylvania Consolidated Statutes Annotated, 68 Pa. Cons. Stat. Ann. § 3103 (West), via WestlawNext