One of the most misunderstood elements of appraisals (by clients, other appraisers, and especially by agents), in my experience, is the concept of condominium ownership. Hopefully this will clear up the matter for some of the newbies. If any veterans can add to, clarify, or even correct this, please do so.

WHEN IS A PROPERTY A CONDO?

The best way to understand the terms confused with condominium ownership is to segregate three categorical descriptions every property features: Ownership type, style, and interest type. The term “condominium” refers to ownership type, and NOTHING ELSE. Often, people are confused when we report a townhome on a condo form because they believe that the terms “condo” and “townhome” are mutually exclusive. This is not the case at all. Many townhomes are owned in condominium ownership. The term “townhome” simply refers to the STYLE of the property’s construction. Other styles include “single family detached, high rise, garden, traditional, ranch,” and so on.

The third category for a property which must be described is the type of INTERESTS the owner has in the property. This includes fee simple, leased fee, and leasehold, among others. Many people are confused when we report an appraisal on the condo form because they believe that the terms “condo” and “fee simple” are exclusive of each other. This, again, is not the case. Each property must have an ownership type, a style (of construction), and an interest type. So it is perfectly acceptable (and even quite common) for a property to be a townhome, with condominium ownership in which the owner has fee simple interests.

I have listed some examples of each category below. While each term is usually exclusive WITHIN ITS CATEGORY, none are exclusive from all terms in the other two categories.

EXAMPLES OF OWNERSHIP TYPES: Condominium, individual, joint tenancy, several tenancy, tenancy in common, tenancy by the entirities, etc.

EXAMPLES OF CONSTRUCTIONS STYLE: Townhome, high-rise, garden style, single family detached, traditional, ranch, tudor, Mediterranean, southwestern, etc.

EXAMPLES OF OWNERSHIP INTERESTS: Fee simple, leased fee, leasehold, title held in trust, etc.

Below is the definition of condominium ownership from John’s glossary.
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Condominium ownership separates a property into:

• Individual ownership elements
• Common ownership elements
• Limited common ownership elements

The living area is owned by the occupant is called a unit. The most likely ownership is fee simple in the unit.

A common ownership element is an area owned and used in common such as a swimming pool, grounds, roads, etc. The owners have a tenancy in common in the shared area.

A limited common ownership element is an area owned in common but which use is limited to specific owners such as a wall between units.

Any type of property can be a condominium including residential, commercial, offices, etc.

A condominium may be owed as tenants in common, joint tenants, or any other legal form of ownership.

If an owner defaults on his taxes or mortgage payment, the lienholder has the option of foreclosing on the unit but action may not be taken against the rest of the owners or against the common areas.

Experienced appraisers should already know the difference between a condo and a townhouse. Newbies in the business will find MAG's post informative and should print it out to save. Over the years I have dealt with numerous realtors who didnt know the diffference and even lenders who asked for the wrong form to be used (1073 vs. 1004).
Thanks to MAG for taking the time to help along the newbies reading this forum.
Savannah Wayne

I have done real estate in 2 other states and it wasn't until moving to Georgia that I discovered this CRAZY debate of condo/townhome. MOST REALTORS have no clue, and to make it more interesting there is the use of PUDS added to the mix. If I am not mistaken PUDS MUST be townhomes because it includes the land fee simple and can't be garden condos on the 2nd floor (No Air Lot). PUD MUST include the land under the unit.

Great Post MAG!

I think the biggest issue with some of the newbies is trying to decipher if it IS a condo ownership. They get confused when looking at a townhome and trying to find out what type of ownership it is. I have heard such things as "check the plat and see if it has individual lots."

The best way to find out what type of ownership it has, is to check the deed. The legal description should refer to the subject as a unit and not a lot. Also check the security deed and see if you have a condo rider attached.

MAG,

Great post!!!

Benjamin,

Be careful with "unit". You are correct sir about a "condo rider".

John B. once taught me to pay close attention to where the deed is recorded.

If it is a condo it should say "recorded in condominium book" xyz. If not, it should say "recorded in book" xyz.

It's not where the deed is recorded but where the plat is recorded.   Condominium plats are recorded in the condominium plat book.

John

I also find it helpful to call zoning to double/triple check how it is zoned if you are still in doubts of any particular property.