Condo, Strata, Co-op, HOA - What's the Difference?

I'm an urban girl. I own a 2-bed 2-bath unit in an inner city condominium project. Our building is a neighbourhood within a neighbourhood. Most of us know - or at least recognize - each other, and for the most part we all get along and watch out for each other. For many city dwellers, home ownership in a common interest development (CID) such as a condominium, strata, townhome, housing cooperative or homeowner association (HOA) is a desirable and affordable option. With so many options available, how do you pick the right one? What are the differences between these types of shared ownership arrangements?

What is a condominium?

A condominium is a form of property ownership in which the homeowner holds title to an individual dwelling unit in a multi-unit project, as well as an undivided interest in the common areas (lobbies, corridors, elevators, stairwells, etc), and usually the exclusive or semi-exclusive use of certain limited common property such as balconies, patios, storage lockers, and parking spaces.

All unit holders in the project are jointly responsible for the maintenance and repair of the commonly owned areas by paying a monthly condo fee. These common areas are owned and managed by a corporation made up of the owners of the units. Some projects are self managed, but many hire a condo management company to look after the common property, hire and deal with contractors, and take care of routine maintenance and repairs.

In Australia and in British Columbia, condominiums are called strata titles and the individual units are called strata lots. In the UK, a similar form of property ownership is called "commonhold". There is no material difference between a condominium, a strata title or a commonhold property.

Condominium ownership can be residential or commercial. Commercial condo ownership gives small business owners a chance to own the real property in which their business is located for substantially less money than a stand-alone building would cost.

How does condominium ownership differ from that of other CIDs?

There are some major differences between condominium ownership and other types of common interest developments. Here's a quick overview to help you decide which program might suit you best:

1. Condominium vs. Townhome

If you own a condo, you own the interior of your unit plus a proportionate interest in the common property. When you buy a townhome, you also buy the land beneath that townhome. This is referred to as a "freehold condominium". Many townhomes also come with garages or yards, which are solely owned by the homeowner and for which the homeowner is solely responsible. For that reason, your monthly HOA fees will often be lower for a townhome than for a similarly sized condominium (because common maintenance fees are lower), but your purchase price will likely be higher.

2. Condominium vs. Housing Cooperative

A condo owner actually owns his or her unit. If you buy into a housing cooperative you don't actually own any part of the property. What you are buying, in fact, is shares in a not-for-profit corporation which owns all the common areas. Your share ownership gives you the right to lease space in the building. The corporation will charge you a monthly fee which covers things like taxes on the building, mortgage payments, and maintenance costs.

This form of ownership has some significant financial consequences. When you own shares in a cooperative, your ownership interest is deemed as intangible personal property. You probably will not be able to get a home equity loan or line of credit against your ownership, because you don't actually own the home. And while real estate would pass to your heirs if you die, your shares in the corporation would pass to the executor of your estate during the settling of the estate, and might be subject to securities regulations. Generally your monthly fees in a cooperative would be a lot higher than condo fees for a comparably sized condominium project, because they will include mortgage and tax payments for the building.

3. Condominium vs. HOA

The distinction here is between the respective purposes and responsibilities of the condominium association and the homeowners association (HOA). A condo association is responsible for the maintenance, repair and replacement of the common property. Each year the Board of Directors determines the costs associated with managing the common property, and each unit owner is assessed their proportionate share of those costs, which are payable on a monthly basis. An HOA is a group of homeowners residing within a particular development or community, whose primary functions are to maintain certain facilities for the community and enforce the covenants and restrictions adopted by the community. The HOA actually owns the common areas and is responsible for maintaining and repairing them - the lot owners have no ownership interest in the common areas. The lot owners have the right to use these common areas, subject to the covenants, restrictions and rules and regulations developed by the HOA. Those rights can be suspended if an owner violates the rules or fails to pay any assessments or fines levied by the HOA.