What’s in a Name?

The Difference Between Architectural Style And Ownership

Confusion abounds regarding the use of the term condominium often as a design/style description. However, a condominium is a form of legal ownership. Not all condos are garden style units just like not all tissues are Kleenex brand. Guilty as charged. I catch myself often generically asking “is it a condo or a townhouse?”

Let’s start with the definition of a condominium.

Condominium –

1. A form of fee ownership of separate units or portions of [multi-unit] buildings that provides for formal filing and recording of divided interest in real property, where the division is vertical as well as horizontal; fee ownership of units in a [multi-unit] property with joint ownership of common areas.

2. A [multi-unit] structure or property in which persons hold fee simple title to individual units and an undivided interest in common areas.

Condominium. (n.d) In The Dictionary of Real Estate Appraisal. (1984). Illinois: The Appraisal Institute of Real Estate Appraisers.

From the definition above, there is nothing discussed regarding architectural style. However, the definition does mention vertical and horizontal divisions. The reference to a horizontal division can be regarding a detached condo where the structure is “horizontally” divided from the underlying land and not individually owned. Not all condos are garden, mid-rise or high-rise styles. Townhome style condominiums are prevalent and detached condos are becoming increasingly common.

Now, let’s look at the definition of fee simple.

Fee Simple Estate –

Absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power, and taxation.

Fee Simple Estate. (n.d) In The Dictionary of Real Estate Appraisal. (1984). Illinois: The Appraisal Institute of Real Estate Appraisers.

Fee simple absolute means to own 100% of the property including all the rights and not sharing with another; the owner has the right to sell, lease, or alter the property within the boundaries of local zoning ordinances. Part of the confusion lies in that condominiums only have fractional fee simple interests. Condo owners may have leasing restrictions, and most condos do not allow the owners to alter the exterior of the unit without permission.

Nowhere in the definition of fee simple does it address if a dwelling unit is attached or detached. The most confusion appears to be regarding attached, semi-detached and detached dwellings with no units stacked above/below. These units can be either fee simple or condos. Think of older row homes in urban cities; they are attached, but there is no condo association or Home Owners Association (HOA) for that matter. I have often heard real estate professionals incorrectly explain the distinction that row homes are fee simple and townhomes are condos/HOA’s. But the terms townhouse and row home are interchangeable as design/style with regional preferences. Detached units cause even greater confusion. Because they are not prevalent in certain areas of the country, appraisers often assume that if a dwelling is detached, then it is fee simple. By their nature, stacked units cannot be fee simple as the unit owners cannot individually own the underlying land.

To make it easier, here is a chart outlining the design/style with the possible forms of ownership:

Design/Style Fee Simple Absolute Condo
Detached (no attached walls) x x
Attached or Semi-detached (at least one adjoining wall but no units above/below) x x
Garden style (two to three levels stacked_ x
Mid-rise (4-7 stories, stacked) x
Hi-rise (8+ stories, stacked) x

It is easy to understand how the confusion began with most the original condominiums constructed as stacked units (garden, mid-rise, and high-rise) with the slang condo attached to the structure. Over the decades, condos were constructed as attached, semi-detached and even detached units but the misuse of the term already had a foothold as a design/style. As real estate professionals, we can educate consumers and lenders on the difference.

Have any comments? Comment below or email comments@appraisalbuzz.com.


About Carol Trice

Carol Trice
Carol Trice | Director of Quality and Review Services for Clarocity, Inc. Carol Trice has over 30 years of real estate appraising experience, including 11 years in commercial valuation. Carol earned the MAI designation in 1990 but resigned in good standing when her career shifted from the commercial area to residential valuation in the late 1990’s. With the switch to residential valuation, Carol owned and operated Trice Appraisal based in Charlotte, NC. A relocation to FL brought Carol to Bank of America as a staff appraiser and team lead. After 5 years, Carol spent the next 8 years with Hudson Advisors/Caliber Home Loans, Inc. managing the capital markets and servicing valuation department. Caliber Home Loans, Inc. is a mortgage servicer specializing in default products owned by a private equity fund. Carol Trice is a Certified General Appraiser in Texas and a Certified Residential Appraiser in Florida.

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