What Is the Difference Between a Townhouse and a Condo?
Understand the fundamental differences in ownership, maintenance, and community living for townhouses vs. condos.
When considering a residential property, the terms “townhouse” and “condominium” often arise, yet their distinctions can be unclear. Both housing types present unique ownership structures and responsibilities that impact a homeowner’s financial obligations and daily living. Understanding these differences is important for prospective buyers to make informed decisions about their housing investment.
Understanding a Townhouse
A townhouse typically involves fee-simple ownership of both the individual dwelling and the land it sits on. These multi-story units often share one or two walls with adjacent properties, resembling a row of connected homes. Townhouse owners generally have direct ground access and may have a small private yard or plot of land associated with their unit. This direct ownership means the homeowner is responsible for the maintenance and repair of both the interior and exterior of their unit, including the roof and any private land.
While many townhouses are part of a Homeowners Association (HOA), its scope is often more limited compared to a condominium association. Townhouse HOAs primarily manage common areas such as shared green spaces, community amenities like pools, or services like trash removal and snow plowing. The homeowner remains solely responsible for their unit’s structural integrity and upkeep, which includes significant costs like exterior painting or roof replacement. Property taxes for a townhouse are assessed on the full value of the structure and the land owned.
Understanding a Condominium
A condominium, often referred to as a condo, represents a distinct form of ownership rather than a specific architectural style. A condo owner possesses the interior living space of their unit, from the walls inward, along with an undivided interest in the common elements. This means they do not own the land beneath it or the exterior structure. The building’s exterior, roof, shared amenities, and land are collectively owned as “common elements” by all unit owners as tenants in common.
A mandatory Homeowners Association (HOA) is almost always a feature of condominium living, playing a central role in managing the property. This association is responsible for maintaining, repairing, and insuring all common elements, funded through regular HOA fees paid by unit owners. These fees typically cover expenses such as exterior upkeep, landscaping, building insurance, and the maintenance of shared facilities like hallways, elevators, and recreational areas. When a condo is used as a rental property, HOA fees are generally deductible expenses.
Primary Differences in Ownership and Maintenance
The fundamental distinction between a townhouse and a condominium lies in their legal ownership structure and corresponding maintenance responsibilities. For instance, a condominium HOA’s master insurance policy typically covers the building’s exterior and common areas. Individual condo owners are then responsible for an HO-6 policy to cover their unit’s interior and personal property. For tax purposes, HOA improvements to common areas can increase a condo owner’s adjusted basis, which is beneficial when calculating capital gains upon sale.
The scope and cost of HOA fees also differ significantly. Condo HOAs generally have higher fees because they cover extensive maintenance, insurance, and utilities for common elements, including the building’s structure. The national median for HOA fees is around $290 per month, but condo fees often exceed this. Townhouse HOAs typically have lower fees, as their responsibilities are usually limited to community amenities and shared grounds. This leaves the individual townhouse homeowner with direct financial responsibility for their unit’s exterior maintenance, such as roof replacement or exterior repainting.
Property tax implications also vary. Townhouse owners are solely responsible for taxes on their entire property, including the land, which can result in higher assessments compared to a condo of similar interior size. Condo property tax assessments typically consider the interior unit and a proportionate share of common elements, often leading to lower individual property tax bills. For income-producing properties, both townhouses and condos may qualify for depreciation deductions. Only the building structure can be depreciated, not the land, with residential rental properties depreciated over 27.5 years under the Modified Accelerated Cost Recovery System (MACRS).