By James N. Graham, MS, JD
When someone uses the term "condo," what image comes to mind? What are the characteristics of a "condo?" Does the term "condo" mean something about the style of property or about the size of the building or about the maintenance responsibilities? No, it means none of these.
"Condominium" is a term which is often misunderstood by the general public and even by some real estate professionals. Condominium strictly refers to the manner of ownership of real property. A condominium property can be a residential building, a commercial or industrial building, or even vacant land. A condominium unit can be residence, but a condominium unit also can be a square inch of space. In short, one cannot know the characteristics of a condominium property in the abstract or based on generalities. In order to know what rights and responsibilities correspond with ownership of a condominium unit, one must review the condominium documents in light of the law.
An analogy helpful to some of my clients is that a condominium is similar to a corporation. Neither is an independent thing. Rather, both a condominium and a corporation is a system of ownership. Both are governed by statutory authority (and supporting case law) and by documents internal to the organization.
The fact that an enterprise is owned corporately does not reveal specifics about the enterprise's activities. It could be for profit or not-for-profit. It could provide a service or a product. It could be successful or unsuccessful. One must review the governing documents and financial statements in order to understand the enterprise.
Likewise, the fact that real property is owned in condominium does not reveal characteristics about the property - it reveals the system of ownership. This is important to understand for many reasons. First, a person considering buying a condominium unit must recognize that they will be in a cooperative venture with the other owners. Second, a unit owner cannot presume to know something about the property itself based upon the fact that it is owned in condominium. The general statement that "condominiums are over-priced" is as meaningless as the statement "corporations are over-priced." Some businesses are over-valued, but the fact that they are owned in corporate shares is not the cause or controlling factor in this determination.
Finally, one cannot presume to understand the rights and responsibilities of unit owners without actually reading the applicable declaration, bylaws, rules and regulations, and the law. It is for this reason that Wisconsin law provides a 5 day right of recission for residential condominium purchase contracts. The buyer has 5 days after receipt of the required disclosure documents to back out of the deal for any or no reason.
One must review the condominium documents to know what the enterprise is all about. A condo is what it is - in order to know more than that, one must delve into the particulars of the enterprise which is owned as a condominium.