Considerations for condo and town house owners

What’s the difference between a condo and a townhouse?

Condos and townhouses are sometimes confused, and for good reason. The terms themselves actually relate to different things; ‘condo’ (or ‘strata’) refers to a type of ownership, whereas ‘townhouse’ refers to a type of building construction.

One of the most common misconceptions among property terminology is that a condo is the same as an apartment. This is not the case. Apartments compared to condominiums are actually quite different.

A condo (or condominium) is simply a term used to describe the common ownership of a building. Common ownership applies (unsurprisingly) to the communal parts of the building, so while you own the space within your apartment walls outright, you’re also a part-owner (and therefore partly responsible) for things like hallways, roofs and external cladding. If your building has a common area, games room or a swimming pool, you’re a part-owner of these, too. Common ownership is achieved through a condo corporation—a legal entity that represents the interests of the owners.

When most people picture a condo, they imagine a sky-scraper, but technically any kind of property can be classified as a condo as long as there is common ownership. Sure, in big cities most condo buildings tend to look like apartment blocks, but they could also be a duplex, or even… a townhouse. Confused? Bear with us.

You see, a townhouse (sometimes known as a row house or a semi-attached house) is simply a type of construction whereby each of the sidewalls is shared (or common) with another dwelling—except in the case of end units, which will only have one shared wall. In this sense, a townhouse holds true to the image of what most people picture it to be. The confusion lies in the classification of ownership.

Usually, when a condo or townhouse is built, the developer will form a condo corporation, owning 100% of the units in that building. With the sale of each unit, buyers receive a share of ownership in the condo corporation until ownership is turned over entirely to residents.

These days, most townhouses are registered (and insured) as condos for the sake of simplicity. In a very few circumstances, the situation may be different, though this occurs rarely. In those rare circumstances, some older townhouses lack any common ownership. Owners are responsible for their individual chunk of the property. That means any losses are the sole responsibility of owners (and their insurance providers). This approach requires many separate policies for one building, each with its own terms and limits.

As such, this approach has largely been phased out. When a townhouse is classified as a condo, the condo corporation can then insure the entire structure under one master policy. The condo corporation will also manage the building and take care of some maintenance issues in exchange for a monthly maintenance fee. Owners are responsible for their own bills on top of this fee, though water (and sometimes gas) is often included.

Insuring a condo

With any property that’s registered as a condominium (including townhouses), the physical structure will generally be insured by the condo corporation. Coverage varies by policy, but most protect the communal parts of the building, as well as the cost to rebuild your unit in the event of a loss. So, if you already have insurance, why should you pay for additional protection?

While this policy is a great back-up, you have no control over they type (or limits) of insurance purchased. It’s possible to find yourself underinsured in the wake of a claim. There are also some things that this type of policy simply isn’t designed to cover, like your liability, personal property and additional living expenses. Square One’s standard condo insurance provides a great foundation of protection by covering all of these.

Our optional Condo Owner’s Protection adds the following coverages:

• Upgrades and improvements: In the event of a loss, you may find the condo corporation is only willing to replace your marble countertops with the Formica laminate of the original build. With Condo Owner’s Protection, upgrades and improvements to your unit are covered.

• Shortfalls in your condo corporation’s insurance: Condo Owner’s Protection also protects against shortfalls in your condo corporation’s own insurance which they decide to levy against you, and amounts assessed against your unit for repairs to the common areas of the building. It also protects you if the condo corporation is forced to make a claim with their insurer and decides to spread the cost of the deductible amongst owners.

• Condo Owners Protection from Square One
• Condo board roles and responsibilities

Insuring a townhouse

The title on most condo-townhouses classifies them as having common ownership. As such, Square One customers will be eligible for the benefits of Condo Owners Protection outlined above. In the event your property is categorized as a townhouse, you can still protect your home, possessions and liability with Square One.

With this—in fact, with all of our policies—you can customize your coverage to suit your insurance needs. Don’t own any specialty property? With us, you don’t pay to insure it. You can also select your own insurance limits and deductibles. Best of all, you can buy online from the comfort of your own home.

Purchase considerations

So, you’re in the market for a new home. What type of property should you choose? Well, that depends what you want. If you value independence over everything else, a detached home is the way to go. If you value ease of maintenance and a sense of community, try a condo. If you’re looking for something in-between a house and a condo, why not consider a townhouse?

If you decide that shared living is for you, don’t forget to consider the physical construction of the building. Concrete offers superior soundproofing, but a wood-frame unit may be cheaper to purchase.

Commonly asked questions

How do I know if I’m looking at a townhouse or a condo?

Check the title or ownership on the property listing. If you see the terms ‘communal’ or ‘shared’ in the home’s advertising, this is usually a giveaway that the ownership is categorized as a condo. If you’re still unsure, ask your realtor, or check with neighbours.

Don’t be fooled into thinking that a townhouse is classified as such just because it’s older. Developers may sometimes buy an entire row of townhouses, renovate, and re-register as condo ownership before selling. It pays to do your homework here.

Can a townhouse be detached?

No. By definition, a townhouse shares at least one wall with an adjoining property. A house without this feature is simply a detached home and will need to be insured as such.

Insurance costs vary depending on coverage options and the value of your personal property. Typically, insuring a condo or townhouse insurance policy is more expensive than a renter’s policy, but cheaper than a homeowner’s policy. Square One’s policies usually start from around $40/month.

What is a reserve fund?

When buying a property with common ownership, check the reserve fund report, reserve fund plan, building inspection report, status certificate and any other documents you can get hold of. Other than providing you with a clearer idea of the general well-being of the building, these documents will identify any major scheduled maintenance, as well as the amount of money in the reserve fund. If, for example, there is $1m in the fund, but $800,000 of repairs scheduled within a year, it’s reasonable to assume that your maintenance fee may rise within that period.

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