(Kerrie) Ok, so if a four-hour flight isn’t bad enough, here we are sitting in the Las Vegas airport – and the flight has just been delayed another three hours. I hope that this condominium law seminar was worth it.

(Jim) Oh yes, it was exciting.

(Kerrie) Uh-huh. So anyway, tell our readers, what exactly is a condominium?

(Jim) It’s a box of air that you buy and live in.

(Kerrie) A box of air? It seems like it should be more than that.

(Jim) Well, okay. Let me explain. When we buy real estate – meaning land - we usually get a two-dimensional description of that land. The boundaries are located by length and width on the surface and we get title to the land below and the airspace above. With a condominium we divide that air space into three dimensions, length, width and height to carve out a box of that airspace. In Ohio, that box of air must consist of rooms within a building. By statute, this form of ownership consists of two separate components. The first is the unit, which is the box of airspace. The second component is an undivided interest as a tenant in common for the rest of the property, which is called the common area. When someone buys a condominium, they get title to the unit and title to a percentage of the common area.

(Kerrie) This all seems rather complicated for the ordinary homeowner. It sounds like all of the unit owners are on the deed to the common property. Isn’t that unwieldy?

(Jim) Sometimes, but if the condo documents are well drafted, it should all run smoothly.

(Kerrie) I’ve seen more of these documents than I care to admit, and you seem to like to read them. Admit it. Aren’t they boring?

(Jim) Not at all, I read them for entertainment. Some are quite funny.

(Kerrie) Yes, I’m laughing on the inside right now.

(Jim) Ohio law requires that the developer of a condominium file a declaration of condominium ownership. This document actually creates the condominium and the two forms of property ownership. This document is important because it describes exactly what the buyer is getting. The boundaries of the individual units are set out in the declaration. The boundaries are generally the undecorated interior surface of the perimeter walls, the undecorated upper surface of the lowest floor and the undecorated lower surface of the highest ceiling. This is the box of air. The law also requires that detailed drawings be filed with the declaration that graphically show these boundaries. Every other portion of the property outside of the boundaries of the individual units is the common area.

(Kerrie) So someone buying a condominium should read the declaration and look at the drawings to determine exactly what they are buying. That’s why the standard contract to purchase includes a contingency that allows the buyer to review the documents. What else should the buyer be looking for?

(Jim) Well, maintenance should also be covered. When someone buys a single-family home, they have the obligation to maintain it, or to choose not to or to defer maintenance. In a condominium the maintenance of the property components may be reshuffled. The units are owned individually and are maintained by the unit owners. A deck, however, is part of the common area owned by all of the owners, but the unit owner may be required to maintain it. It is important that buyers check to see what their maintenance responsibility is prior to buying.

(Kerrie) Well, I’ve owned a condominium and maintenance can be a big issue. The condominium association makes the decisions about maintenance of the common area and the owners generally do not have much of a say in this.

(Jim) Right. The law also requires that every condominium have an association that administers the property. This is usually a nonprofit corporation, which under law is run by the board of trustees. The owners elect the trustees and the trustees make all of the decisions for the corporation. The trustees have a fiduciary duty to look out for the best interests of the owners to protect, preserve and enhance the value of the property.

(Kerrie) As a result, the owners give up their individual control over decisions about the property. For some buyers this could be a huge reason not to consider a condominium when purchasing a new home.

(Jim) Because of the close living space, unit owners, by necessity, give up some of the rights that they might have in a single-family home. There are very often many restrictions on the use of the property. For example, there may be restrictions on pets and the number and type of vehicles that can be parked on the property. This is another reason to closely read those documents. If a prospective buyer has two large dogs, a motor home and a boat, that buyer might want to look elsewhere.

(Kerrie) So is a landominium the same thing? It seems like it would be similar.

(Jim) They sure look the same, but there are differences that can be significant. Landominium is a marketing term for what is really a fee simple form of ownership where the unit owner takes title to the land beneath the unit. The legal description of the property is usually a lot number in a subdivision that has been described in a traditional two-dimensional manner. The lot lines are usually the outside perimeter of the unit. This form of ownership works only with units on the ground level. If there are units above other units, the condominium form must be used. The more correct name for this type of unit is Planned Unit Development or PUD. The lots are created by a plat and there is a declaration that defines the rights and obligations of ownership.

(Kerrie) So what should buyers be concerned about regarding property within a PUD?

(Jim) The same things as a condo but there will be differences. The main difference is what is owned by the unit owner and what is common area. In a condo, the basement walls are part of the common area that must be maintained by the association. In a PUD, the basement walls are within the owners lot and must be maintained by the owner. The same is true for the exterior walls. As you know, basements sometimes leak and the repairs can be costly. A landominium buyer should not assume that the association will pay for any such repairs.

(Kerrie) Insurance is also an issue in both types of ownership. Although the declaration will require the association to have insurance, buyers should not assume that they do not need insurance. There is a special insurance policy for these types of property called an HO-6 policy. It is more than contents insurance. It will cover the assessments if the owner must move out of the unit due to a casualty - such as the tornado that hit the cities of Montgomery and Blue Ash a few years ago. The HO-6 policy can also cover the difference in the deductible under the association’s policy. Very often condo associations, to save on ever rising premiums, set a high deductible that the owner must pay in the event of a casualty loss. For example, the association’s policy may have a $1,000.00 deductible, while the HO-6 policy has only a $100.00 deductible. In the event of a loss, the owner pays the first $100.00, the HO-6 policy pays the next $900.00, and the association’s policy pays the rest of the claim.

(Jim) You know there are a lot of things to know about buying this type of property and all of those documents to read. I think that a buyer should consult a real estate lawyer to help in that purchase. But that’s just my opinion.

(Kerrie) And mine.

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Jim and Kerrie Matre are married partners in the law firm of Matre & Matre Co., LPA. The firm generally limits its representation and practice to all legal issues related to real estate, construction law and corporate representation.

This article is written to introduce the reader to common real estate legal concepts. It is not intended to be legal advice to any specific party. As always, consult your attorney regarding your specific situation.

Have questions? Email them at either kmatre@matrelaw.com or jmatre@matrelaw.com