Q. What is a condominium?
A. Usually found in urban centers or densely populated suburbs, condos (as they are commonly referred to) became popular in the 1970s when state legislatures passed laws allowing their existence.
An apartment building is converted to a condominium by means of a condominium declaration (often called a “condo dec”). New construction condominiums must also have a condo dec.
This declaration divvies up the percentage of ownership, defines which areas are commonly held by all owners, determines who is responsible for the maintenance of the property, and states the condo rules.
One of the most important things to remember about a condo is that you don’t actually own the unit in which you live. Instead, you own the airspace inside the walls, ceiling, and floor of the unit, possibly the plumbing within your unit, and perhaps a parking space. (With new construction condos, you sometimes have to buy your parking space separately.) With your neighbors, you also jointly own what’s known as the common elements of the property, which may include the roof, plumbing, common walls, lobby, laundry room, garden area, garden or garage.
Developers building new condos, or renovating an old apartment building to turn it into condos, may keep control of the newly formed condo board or homeowners association, until a certain percentage of the condos have sold.
This can present some difficulty, especially if there a physical problem with the units (such as a leak) and the homeowners decide to sue the developer.
Another issue to think about is that financing new construction can be tricky. Usually, the developer hooks up with a lender to fund the loans. But the national secondary mortgage market leaders (Fannie Mae and Freddie Mac) require that 70 percent of the units be occupied by homeowners before they will fund a loan. So if you decide to refinance before 70 percent of the units are occupied, you may have some trouble. Similarly, if 31 percent of owners decide to rent their units, you may also have trouble financing or refinancing your unit.
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