The difference between a condo and a townhouse (also sometimes called a townhome) is pretty simple, but don’t let looks deceive you because you can’t always tell by just looking at them. Sure, if you’re looking into purchasing a unit in a high-rise building you can pretty safely guess that it’s going to be a condo, but other times it’s not so clear. The distinction between the two in the State of Texas (and many other states) deals more with how you own the property than how it looks. Here’s the difference:
If you own a townhouse, you own the land directly underneath your unit as well as an (indivisible) interest in all of the Common Areas. You’ll most likely have an HOA and HOA payments to maintain and manage Common Areas.
If you own a condo (even if it looks like a traditional townhouse) you don’t personally own the land underneath your unit. Instead, you also own an indivisible interest in all the Common Areas and all of the land is considered Common Areas. You’ll have an HOA and HOA payments to maintain and manage Common Areas.
But what does all this actually mean? We put together a quick FAQ to help you out.
1. What is a Common Area?
Common Areas can include lawn and garden areas, pool, club house, parking areas, tennis courts, etc. Generally, if it’s an amenity on the property, it’s considered Common Area. HOA documents (we’ll go over that in greater detail later) will specifically list all Common Areas.
2. So how do you know whether or not a property is technically a condo or a townhouse?
The property listing should designate whether or not the property is a condo or townhouse. Some agents in Austin (and probably other cities as well) sometimes misclassify condos that have a townhouse appearance. Even if it is misclassified, don’t worry- your lender should check the legal designations for any financing.
3. What does “Indivisible Interest” mean in Real Estate?
Having Indivisible Interest means that you own a portion of the property that cannot be divided. A good example of this is if there are 20 condo units in a community, each unit owner owns 1/20th of the Common Area/land. Because it’s indivisible, no single owner can sell off, build on, etc. any piece of the Common Area.
4. Are A/B Units in Austin townhouses or condos?
Because of the way that the city code is written, most if not all A/B units are designated as condos and not townhouses.
5. How does owning a condo differ from owning a townhouse in terms of daily life?
While many aspects of owning a condo or townhouse are similar – like having an HOA, some level of indivisible interest, and common areas – others can can vary quite a bit. Each community should clearly outline what is maintained by the HOA and what is maintained by the owner. Oftentimes, condo owners are not responsible for maintaining anything on the exterior, but with this is not always the case, especially when it comes to A/B Units. As boring as it may sound, make sure you read your HOA documents to see what you are responsible for! Other differences between condos and townhouses are homeowners insurance policies and mortgages – work with your lender and insurance agent to make sure that you have the correct policy and mortgage for your property.