Condo vs. Apartment: The Differences Between Them

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A common question that home buyers have during their search for a new home is the differences between a condo and an apartment. The differences between them can mean not just the type of property, but can affect things like what you can modify, ownership, costs, and responsibilities.

Difference Between Condo and Apartment

The key difference between them is that a condo is purchased, while a rental apartment is rented. A rental apartment is also known as a condo apartment, as it is an individual unit but is leased out by a landlord. Since you own a condo, that means you own your condo’s living space outright. However, while you own what is inside your condo unit, you do not own the area outside of your condo. That is the condominum’s common areas, which can include sidewalks and lawns, and even elevators, furnaces, hallways, and the lobby if applicable.

Responsibility for the upkeep and improvement of common areas are shared between condo owners through monthly condo fees collected by your condominium corporation. This condo fee can even include utilities, such as water and hydro, depending on your condo corporation. Being the owner of a condo gives you membership in the condominium corporation that collectively owns the condo structure. As an owner, you and other fellow condo owners elect members of the condo board, which is responsible for the management of the property.

Condo apartments are rented to tenants, and tenants do not own the apartment unit. As a tenant of a condo apartment, your landlord is responsible for all maintenance and upgrades both inside the apartment and outside. While there are no monthly condo fees, you will pay rent to your landlord instead. Since you do not own the unit, you will also not gain from any appreciation in the value of your property.

Depending on your lease agreement, your utilities may be included in your rent. This can include water, hydro, heating, and central air. 

CondoRental Apartment
OwnershipYesNo
Gain From Increased Property Value?YesNo
Maintenance ResponsibilityInterior OnlyNo
Utilities Included?DependsDepends

What kind of property can be a condo?

Although condo apartments are the most common, not all condos are high-rise buildings. Row townhouses, detached townhouses, duplexes, and lofts can all be owned as a condo. Any property where you own the unit’s living space but has shared common areas and property can be considered a condo.

These common spaces, systems, and property can include plumbing and wiring in condo apartment blocks, the roofs of row townhouses, or swimming pools and fitness centers. Not all condo buildings have amenities such as pools, party rooms, or 24-hour concierge/security. 

Regular Condo vs Freehold Condo

With a regular condo, you own and are responsible for the interior of the unit. The condominium corporation owns the building as well as the surrounding land and is responsible for its maintenance and upkeep. Your condo fee is your share of the costs of this maintenance. The condo board decides upon all improvements to the condo complex such as landscaping and planting flowers. 

In a freehold condo, the condo owner owns the plot of land the condo sits on. This comes into play more if you are considering buying a condo townhouse, rather than a condo apartment. You are responsible for the care and maintenance of the entire unit, inside and outside, and the costs associated with that. With a freehold condo, you have more freedom to make the changes you want to the outside of your unit, such as changing your door color or planting a tree. However, the condo board may have rules and guidelines that limit your choices, such as enforcing white or off-white colours for curtains and window coverings.

Condo Townhouse

Just like the difference between regular condos and freehold condos, there are condo townhouses and freehold townhouses. A condo townhouse is where you own the interior of the townhouse, while the exterior is owned by your condo corporation. A freehold townhouse is where you own both the interior and exterior of the townhouse, and includes ownership of land.

Condo townhouses are generally cheaper than freehold townhouses, and things like lawn care and snow removal are taken care of by the condo board. You will be charged a monthly condo fee instead, and your condo board might have rules on the exterior of your home, such as the types of window coverings or the types of plants you can plant.

Are condos a good investment?

Evaluating condos as an investment includes both financial and living style considerations. Not having to worry about maintenance or upkeep on the exterior of your home, which can include snow shovelling during the winter or lawn mowing during the summer, and also lower closing costs can appeal to both younger people, especially first time home buyers,  who do not have time or for those who are older who are finding these tasks more demanding. Living in a condo might also give you access to amenities that you might not otherwise have in a detached home, such as a pool, gym, or concierge. These amenities might make a condo a good lifestyle investment.

On the other hand, you do have to pay monthly condo fees to cover the costs for maintenance and amenities. Some condos might also have low monthly condo fees initially, only for the fees to be increased significantly as the property ages. Others might have renovations held off to save money, which may lead to reduced property values later on. 

Special assessment fees may also be charged occasionally to cover large expenses, such as renovations for a new roof, replacing the windows, or repaving the parking lot. These fees can be quite hefty, and can increase as the property becomes older.

While condos are generally less expensive than single-family homes, such as detached homes, they are also usually smaller. Since the main price appreciation in real estate is the land, your return on investment on a condo might be less than a detached house. Monthly condo fees will also eat into your return.

Meanwhile, tenants of an apartment do not receive any gains from any home value appreciation of their unit’s building, as they do not own their unit. To rent or to buy a home can depend on your financial situation, but also on your lifestyle, such as if you frequently move, or if you cannot afford a mortgage.

What is a condo reserve fund?

One part of the monthly condo fee goes into an operating account and another part goes into a reserve fund. This reserve fund is used to cover replacements and major repairs, while the operating budget covers ongoing maintenance for normal wear-and-tear. 

The reserve fund should be large enough to cover any future anticipated renovations or repairs. To find out what these will be, the condo corporation can commission an accredited reserve fund study by engineers or architects. This is a thorough examination of the entire building that assesses what assets, physical aspects, and systems (such as roofing, electric, and plumbing) will need work done to them in the future. The study also contains a predicted schedule and estimates how much the cost will be at that time. In Ontario such a study is mandated by law, but it is not required in Quebec.

Extensive renovations that are needed might exceed the amount of money in the reserve fund. A special assessment fee will then be charged for your share of the work.

What do condo fees cover?

The monthly condo fee covers the general maintenance and upkeep of the common property and common areas. This usually includes building insurance, water and gas, and sometimes hydro (electricity) costs, such as for lights in common areas. 

Condo fees are mandatory by law; you can’t opt out of them when you buy a condo. The condo board can take legal action against you if you default on paying the fee. Condo fees are assessed on the value of your unit compared to the value of the building as a whole. If your unit is one of six in the building, but its value is 20% of the building’s value, then you’ll be assessed at 20% of the common costs. Be aware! The more amenities the condominium complex has – for example, a pool – the more it’ll cost to maintain them and the more you’ll have to pay in condo fees. If you don’t need all the extra amenities, it might be better to look for a property without them.

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