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A condominium (or condo for short) is an ownership regime in which a building (or group of buildings) is divided into multiple units that are either each separately owned, or owned in common with exclusive rights of occupation by individual owners. These individual units are surrounded by that are jointly owned and managed by the owners of the units. The term can be applied to the building or complex itself, and is sometimes applied to individual units. The term "condominium" is mostly used in the US and Canada, but similar arrangements are used in many other countries under different names.
Residential condominiums are frequently constructed as apartment buildings, referred as well as Horizontal Property. There are also rowhouse style condominiums, in which the units open directly to the outside and are not stacked. Alternatively, detached condominiums look like single-family homes, but the yards (gardens), building exteriors, and streets, as well as any recreational facilities (such as a pool, bowling alley, tennis courts, and golf course), are jointly owned and maintained by a community association. Many are commercial condominiums in which the individual retail and office spaces are owned by the businesses that occupy them, while the common areas of the mall are collectively owned by all the business entities that own the individual spaces.
Unlike apartments, which are by their leasehold estate, in most systems condominium units are owned outright, and the owners of the individual units also collectively own the common areas of the property, such as the exterior of the building, roof, corridors/hallways, walkways, and laundry rooms, as well as common utilities and amenities, such as the HVAC system and elevators. In other property regimes, such as those in Hong Kong and Finland, the entire buildings are owned in common with exclusive rights to occupy units assigned to the individual owners. The common areas, amenities, and utilities are managed collectively by the owners through their association, such as a homeowner association or its equivalent.
Scholars have traced the earliest known use of the condominium form of tenure to a document from first-century Babylon. The word originated in Latin.
Condominia (the Latin plural of condominium) originally referred to territories over which two or more sovereign powers shared joint sovereignty. This technique was frequently used to settle border disputes when multiple claimants could not agree on how to partition the disputed territory. For example, from 1818 to 1846, Oregon Country was a condominium over which both the United States and Great Britain shared joint sovereignty until the Oregon Treaty resolved the issue by splitting the territory along the 49th parallel and each country gaining sole sovereignty of one side.
Where a condominium is in essence an apartment building, as a practical matter, builders tend to build condominiums to higher quality standards than apartment complexes because of the differences between the rental and sale markets. They are typically slightly larger than apartments and are often constructed in a Terraced house style in regions where single-family detached homes are common.
Technically, a condominium is a collection of individual units and along with the land upon which they sit. Individual home ownership within a condominium is construed as ownership of only the air space confining the boundaries of the home. The boundaries of that space are specified by a legal document known in the United States as a Declaration, filed on record with the local governing authority. These boundaries may extend to the interior side of the walls surrounding a condo, allowing the homeowner to make some interior modifications without impacting the common area. Anything outside this boundary is held in an undivided ownership interest by a corporation established at the time of the condominium's creation. The corporation holds this property in trust on behalf of the homeowners as a group—it may not have ownership itself.
Some condominium complexes consist of single-family dwellings. There are also "detached condominiums" where homeowners do not maintain the exteriors of the dwellings or yards, and "site condominiums", where the owner has more control and possibly ownership (as in a "whole lot" or "lot line" condominium) over the exterior appearance. These structures are preferred by some planned neighborhoods and gated community.
Rules for the association may be in the master deed, or could be a separate set of bylaws governing the internal affairs of the condominium. Matters addressed in the condominium bylaws may include the responsibilities of the owners' association, voting procedures to be used at association meetings, the qualifications, powers, and duties of the board of directors, and the powers and duties of the officers. The Bylaws may also cover the obligations of the owners with regard to assessments, maintenance, and use of the units and common areas, although those obligations are often found in the condominium's founding documents. Finally, they may set limits on the conduct of unit owners and residents. These are more readily amendable than the declaration or association bylaws, typically requiring only a vote of the governing body. Typical rules include mandatory maintenance fees (perhaps collected monthly), pet restrictions, and color/design choices visible from the exterior of the units. Generally, these sets of rules and regulations are made available to residents and or as a matter of public record, via a condominium or homeowners association website, or through public files, depending on the state and its applicable laws. Condominiums are usually owned in fee simple title, but can be owned in ways that other real estate can be owned, such as title held in Trust law. In some jurisdictions, such as Ontario, Canada, or Hawaii US, there are "leasehold condominiums" where the development is built on leased land.
As condominium unit owners may wish to Renting their home to leasehold estate, similar to renting out single-owner real estate, but leasing rights may be subject to conditions or restrictions set forth in the declaration (such as a rental cap for the total number of units in a community that can be leased at one time) or otherwise as permitted by local law.
Another 5% of Danish homes are in housing cooperatives (Danish andelsbolig), which occupy a legal position intermediate between condominiums and housing associations. The entire property is legally owned by a non-profit corporation, in which the tenants own shares; each share carries the right and duty to lease an apartment from the cooperative. Shares can be bought and sold, but often the cooperative's rules strictly limit the price for which they may change hands. (In contrast, condominiums are traded on a free market). Because the official share prices are often lower than the market value and sellers often retain the freedom to select whom to sell to, under-the-table payments occur.
Current public policy favors condominiums over housing cooperatives, and recent legislation has aimed at making the latter more condominium-like. For example, since 2005, cooperative shares may be used to secure bank loans. (However, Danish mortgage banks still may not mortgage individual housing cooperative apartments.)
By virtue of the landmark case of Tulk v Moxhay, in English law only restrictive covenants can be enforced against freehold land. This means it is not possible to enforce a positive covenant on successive owners of freehold land, other than to maintain a boundary fence, without creating an elaborate trust. A positive covenant is, broadly, one that involves the expenditure of money to perform.
This did not create a significant problem until the 1950s when flats (where ownership is divided horizontally) first began to appear on the market as more affordable, particularly for first-time buyers. Until then flats had been confined to short-term unsaleable tenancies, with varying degrees of statutory rent protection and security of tenure.
It was soon learned that freehold flats were an unsatisfactory form of ownership because it was not possible to impose essential maintenance requirements. As such, flats became virtually unmarketable because they were an unacceptable form of security to lenders. Thus solicitors, the principal property lawyers in England and Wales in those days, began to use leases instead, where such limitations did not apply.
Progress was haphazard and piecemeal, but over time things became more standard. Improvements became universal as institutional lenders refused to advance money on the security of flats unless certain basic provisions were included. This benefited owners whether or not they borrowed money since the purchase was invariably conducted through a solicitor or licensed conveyancer trained to reject leases failing to meet the necessary standards.
Despite these standards, the actual form of leasehold systems is variable. Highly favoured are arrangements where the leases are granted out of a freehold owned by a corporation, itself owned by individual leaseholders. This provides an opportunity for them to participate in the proper management of the block. Again, the quality of management is very variable.
The statute creating commonholds was motivated by a desire to eliminate some of the problems and perceived injustices, such as the commercial exploitation of lessees by freeholders as their leases began to have too little time left to satisfy lenders. Since most leasehold developments are undertaken by commercial entities, commonholds did not become widespread. There are, however, other statutes in place that give some degree of protection for leaseholders. It is, nevertheless, essential to consider proper legal advice whenever engaged in the purchase of a flat, for the requirements for a fully marketable flat remain complex.
The Law of Property Act 1925, s. 153, contains provisions for the "enlargement" of leases into freeholds, one of the effects of which is to preserve the enforceability of positive covenants contained in the lease against the resulting freehold. There are clear, but stringent, requirements. Artificial schemes using the provisions to create enforceable positive covenants in freehold blocks of flats were occasionally mooted but never gained currency.
On 21 July 2020 the UK Law Commission reported on the existing difficulties and made proposals to improve the law and encourage the acceptance of commonhold as the preferred form of tenure.
A housing cooperative is a common form of home ownership in Finland. Owning shares that correspond to one apartment in a housing company is generally considered as much owning your own home as actually directly owning a (single family) house. However, shares are not considered as real estate but as personal property and the co-op can take possession of the apartment for a term time and evict the tenant or owner because of disturbance or unpaid maintenance fees.
Finnish housing cooperatives are incorporated as (non-profit) limited-liability companies (, ), where one share usually represents one square meter (sometimes ten) of the apartment.
Membership in a condo is obtained by buying the shares on the open market, most often through a real estate agent. No board approval is needed to buy shares, but in some cases other stockholders or the housing cooperative itself has the right to claim the stocks being sold. There is usually no requirement for the owner(s) to live in the condo. Owning apartments for rent is a common form of saving and private investment in Finland.
Condominiums in Hungary are traded and mortgaged on the same market as any free-standing single-family home (; "garden-house"), and are treated much like other forms of real estate. The condominium acts as a non-profit legal entity maintaining the common areas of the property, and is managed by a representative () elected by the owners' convention. Historically, this representative was one of the owners themselves; in the 21st century, however, the owners' convention typically hires a professional building manager who does not personally live in the building. Decisions that involve changes to the terms and conditions, or larger common expenses, still need to be approved by the convention, however. Voting power is based on the percentage of property owned.
The association of homeowners has many names - two common names are Resident Welfare Association (RWA) and the other being a Co-operative Housing Society (CHS) or Co-operative Group Housing Society (CGHS), which needs to be registered with the municipal authorities.
In Singapore, most houses without such features are built by the governmental Housing Development Board (HDB), and such HDB units can be possessed for rent or individually bought from the government. Condominiums and HDB flats make up the overwhelming majority of available residential housing in the country.
Section 234 of the Housing Act of 1961 allowed the Federal Housing Administration to insure mortgages on condominiums, leading to a vast increase in the funds available for condominiums, and to condominium laws in every state by 1969. Since then, the term 'condominium', or 'condo' for short, has become a household word in the U.S. Many Americans' first widespread awareness of condominium life came not from its largest cities but from South Florida, where developers had imported the condominium concept from Puerto Rico and used it to sell thousands of inexpensive homes to retirees arriving flush with cash from the urban northern U.S.
The primary attraction to this type of ownership is the ability to obtain affordable housing in a highly desirable area that typically is beyond economic reach. Additionally, such properties benefit from having restrictions that maintain and enhance value, providing control over blight that plagues some neighborhoods.
Over the past several decades, the residential condominium industry has been booming in some metropolitan areas, such as Miami, San Francisco, Seattle, Boston, Chicago, Austin, Los Angeles, and New York City. However, in recent years, supply within the condo industry has caught up with demand, and sales have slowed. It is now in a slowdown phase.
An alternative form of ownership, popular in parts of the U.S. but found also in other common law jurisdictions, is housing cooperative, also known as "company share" or "co-op". A Housing Cooperative is where the building has an associated legal corporation and ownership of shares gives the right to a lease for the residence of a unit. Another form is ground rent ( solarium) in which a single landlord retains ownership of the land ( solum) but leases the surface rights ( superficies) which renew in perpetuity or over a very long term.
In the U.S., there are several different styles of condominium complexes. For example, a garden condominium complex consists of low-rise buildings built with landscaped grounds surrounding them. A townhouse condominium complex consists of multi-floor semi-detached homes. In condominium townhouses, the purchaser owns only the interior, while the building itself is owned by a condominium corporation. The corporation is jointly owned by all the owners and charges them fees for general maintenance and major repairs. Freehold townhouses are exclusively owned, without any condominium aspects. In the U.S., this type of ownership is called fee simple.
New York's Condominium Act was passed in 1964. The first condominium building was the St. Tropez Condominium in Manhattan, built in 1965.
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