What Do You Own When You Buy a Condo? Condo Investments Explained
Condominium buildings are usually close to the "action" in a city. Most condos come with spectacular amenities, and they live in proximity to perks like fine dining, concert venues, nightlife, the city's financial district, and more. But what exactly does a condo buyer "own" when purchasing a unit inside one of these buildings? It's not the same as buying a house, where the buyer owns every blade of grass and every fixture on the property. Read on to learn what condo owners actually own when they buy a condo.
What "The Air Space Inside the Condo" Means
When someone buys a condo unit, they typically become non-exclusive owners of particular community property (stairwells, sidewalks, etc.), and then they own "the air space inside the condo." The air space is legally defined in most states as the space between a condo's floor, ceiling, and walls. Condo buyers own the paint on the walls and ceiling, but they don't own the drywall beneath it.
Likewise, a condo owner owns the flooring, whether carpeting, tile, or hardwood, but does not own the subflooring beneath it. Cabinets, appliances, sinks, toilets, and other fixtures are considered inside the air space and are therefore owned by the condo owner, meaning all of these fixtures and features can be changed by the condo owner.
The owner also has part ownership in "exclusive use common areas." An example of this might be a rooftop pool collectively owned by all the building's residents.
"Having an Interest" vs. "Owning:" Why Condo Owners Don't Own the Land
One of the main differences between buying a house versus buying a condo is that condo owners are not landowners. A condo owner is purchasing an "interest" in the condo association that runs the day-to-day operations of the building, similar to a homeowners association. Some associations manage condos, known as condominium associations or COAs.
Condominium is a Latin word that means "Owning property together." That's what it is like when someone buys a condo unit. They have an "interest" in the land beneath the building, but the building's association owns the actual land.
Owning an "interest" in a condominium building is similar to owning shares in a tradable corporation. Someone could own 10 percent of the shares in the company, but that does not mean they own 10 percent of the company's merchandise or 10 percent of the company's physical headquarters. The "interest" is not tangible, such as the steel that makes up the building's structure or the land beneath it.
General, Limited, & Exclusive Common Elements
Three common elements are essential to understand when it comes to shared ownership rights within a condominium building. These are General Common Elements, Limited Common Elements, and Exclusive Common Elements.
- General Common Elements: Every condo owner has a shared interest in the general common elements of the building. Elements under this category include the building's lobby, elevators, entrances, hallways, stairwells, etc. Condo owners have access to all general common elements.
- Limited Common Elements: These are elements of the building that the homeowners association owns, but only some residents are allowed to access. Examples of this might include a rooftop patio or community garden, which only the owners of specific condo units can use. Another example might be a pool or a gym on one floor of the building, which only condo owners on that floor can use.
- Exclusive Common Elements: These are specific elements that the homeowners association owns and maintains, but only one condo owner has access to. The most common example would be a balcony accessed through only one condo unit. The HOA owns the balcony and performs the maintenance and upkeep for it, but no one else in the building is allowed to use that balcony.
How to Learn Exactly What You Own
When buying a condo, two things to closely examine are the building map and the Covenants, Conditions, and Restrictions (usually called a CC&R) document. These explain exactly where the condo unit is, what the buyer is purchasing and will own exclusively, and the General, Limited, and Exclusive Common Elements. This document will cover everything from the smallest fixtures in the condo unit to the HVAC system to the sidewalks outside the building.
Why It's All Important
Condominium owners' legal rights and responsibilities are different from those faced by single-family homebuyers. These things are essential to know so that buyers are not taken advantage of during the buying process. They should know all their property rights, exclusions, and other legal privileges going into the purchase.
A condo owner does not own as many physical "things" as someone who buys a house. This is also part of the appeal of condo ownership because the buyer has fewer overall maintenance responsibilities than a homeowner.
Learn These Things Before Buying a Condo
The lifestyle and perks of condo living are a big draw for many buyers. A buyer agent can explain all of the rights and responsibilities of ownership to a potential condo buyer, and each buyer can take the CC&R document to their attorney for review. Some items in the CC&R might even be negotiable, such as access to a specific amenity, so it pays to understand condo ownership's legal ins and outs during the buying process.