Townhomes and Ownership:How to Tell if a Townhome is Fee Simple or Condominium Ownership

You can't tell the difference between a Condo and a Townhome just by looking at them.  It's not style, design, or physical characteristics that determine the answer.  It's an OWNERSHIP ISSUE.


To determine if a townhome is fee simple or condominium ownership, you should ask for a copy of the community’s legal documents. If it is a fee simple townhome, the first page of the legal documents will typically be written as declaration of covenants, conditions, and restrictions (CCR’s) or something similar. If the property is condominium ownership, the first page will always say declaration of condominium. 


What is the difference between Fee Simple and Condominium ownership? 


1)  FEE SIMPLE
“The largest, most complete bundle of rights one can hold in land and land ownership.”  If the property is a fee simple townhome, the townhome is a part of a community where the property has been subdivided so the property owner owns the lot and the townhome that sits on the lot. Even though townhomes have common walls, fee simple ownership is very similar to a single-family home. In fee simple ownership, typically the owner is responsible for maintenance of the exterior walls, roof, and yard.


2) CONDOMINIUM
“Individual ownership of a space of air plus undivided ownership of common areas.”  A condominium is not a subdivision of real property. Basically, the title holder owns everything inside the interior walls. From the exterior walls out is owned by all owners as one body. Each homeowner has a share of the common areas. All exterior maintenance and upkeep of the grounds is usually managed by the HOA or board. 


It is important to know the type of ownership of a property prior to listing the property or representing a buyer on a purchase. 


As a Listing Agent, you should request that sellers provide copies of the tax bill, survey (if one exists), the community’s legal documents, name & contact information for the HOA and/or property manager, and the property’s legal description. 


As a Buyer’s Agent, you should review the listing for the property type and HOA dues. You should also do extra due diligence to confirm the type of ownership. It may be easier for a buyer to obtain mortgage financing on a simple townhome than it is on a condominium. For condominiums, underwriters typically have more guidelines and regulations. The buyer will need to go through the process of qualifying as a borrower and the lender also needs to confirm that the condo is approved.