Condos and townhouses

“Condo” is a way of owning: you own your unit plus a share of the common areas. A townhouse is a building style: it can be a condo, or a home on its own lot in a planned community with an HOA. When you buy a condo or townhouse in a homeowners association (HOA), you own your unit but share the building or community with everyone else. The HOA collects monthly dues and keeps a savings account (“reserves”) for big repairs like roofs, balconies and concrete. It also sets rules on pets, parking, remodeling and renting. Its board can raise dues and charge “special assessments” (one-time bills) when reserves fall short, and in many states it can foreclose if an owner doesn’t pay.

In 2021 the Champlain Towers South condo collapsed in Surfside, Florida, killing 98 people. Florida then required inspections and fully funded reserves for older buildings. In some buildings, owners were billed $50,000 to $140,000 each. California has its own balcony laws: condo associations in California must have an engineer or architect inspect exterior elevated elements, such as balconies, walkways and stairs (Civil Code 5551, from SB 326). California apartment buildings with three or more units face similar inspections (SB 721). In Nevada, an HOA’s lien for up to 9 months of unpaid dues can come ahead of the first mortgage. Nevada saw many HOA foreclosure sales after the housing crash. Nevada HOA sales can’t wipe out a mortgage Fannie Mae or Freddie Mac owns while they’re in federal conservatorship, unless the FHFA consents (12 USC 4617(j)).

Condos are often the cheapest way into a market, and the HOA handles outside upkeep. The risk is that you’re tied to your neighbors’ decisions. A board that kept dues low for years can leave a big bill for whoever owns the unit when repairs finally come due. Before you buy, read the budget, reserve study, board minutes and rules (including any limits on renting).

Who it suits

First-time buyers who want a lower price than a house and don’t want to do exterior maintenance.
Owners who plan to live in the unit and are comfortable following shared rules.
Buyers who carefully check the HOA’s finances and pick a well-funded, well-run association.
Retirees or people who travel, as long as they have savings to cover a surprise assessment.

Who it doesn’t

Buyers stretching to afford the mortgage with no savings left for a special assessment.
Investors who plan short-term or nightly rentals without confirming the HOA allows them.
Anyone buying in an older building without seeing the reserve study, inspections and minutes.
People who fall behind on dues. In all five states we cover, an association can foreclose for unpaid dues, under different rules in each. Texas has two sets of rules. A neighborhood (subdivision) HOA usually needs a court order first (Property Code 209.0092). A condo association can sell without going to court, using the usual trustee-sale steps unless its declaration says otherwise, and the owner then has 90 days to buy the home back (82.113). Neither can foreclose for unpaid fines alone. The recorded declaration tells you which rules apply; a townhome can fall under either.

Real stories

A $100,000 assessment sent a retiree back to work (2024)

She bought her unit for $400,000 in 2021, putting most of her retirement savings into the down payment. Within a year the association billed her $100,000 for concrete repairs, new windows and higher reserves. Selling was not a way out, because the assessment had pushed values down (a similar unit was listed at $335,000). So she went back to teaching full time in Las Vegas and moved in with her son to pay it off.

Lesson: Before buying in an older building, check the reserves and inspection reports. Keep savings for a surprise assessment. NBC News: A reckoning is coming for Florida’s condo owners as buildings face millions in repairs (Aug 11, 2024)

A $140,000-per-unit bill (2024)

Two-bedroom units in the building sold for $400,000 to $500,000. Owners were told to pay $140,000 each toward a special assessment for building improvements. It was part of a wave of large bills after Florida’s post-Surfside safety law.

Lesson: A special assessment can equal a third or more of a unit’s value. Ask about planned projects before you buy. NBC News: A reckoning is coming for Florida’s condo owners as buildings face millions in repairs (Aug 11, 2024)

HOA auctioned a $430,000 home for $30,000 (2018)

After serious medical problems, the owner fell behind on both her mortgage and her HOA dues. She arranged a short sale with a buyer ready to pay $450,000, but she did not tell the HOA about it. The HOA then sold the house at a foreclosure auction over the unpaid dues for $30,000, which ended the short sale.

Lesson: In Nevada an HOA can foreclose for unpaid dues. If you are behind, talk to the HOA in writing right away, even if a sale is pending. KTNV 13 Investigates, Las Vegas: Woman loses home after HOA auctions nearly $500K home for $30K (Jul 23, 2018)

Building rules protected owners who didn’t want to sell (2024)

A developer bought all but ten of the 192 units and took over the board. It changed the rules so 80% of owners, instead of 100%, could vote to end the condominium and tear the building down. The holdouts sued. A Florida appeals court ruled the change violated their voting rights and the termination was illegal.

Lesson: Read the declaration. Some condo documents give each owner strong rights, such as a veto over termination. NPR (via WYSU): A court decision worries developers eyeing Florida’s aging condos (Jul 29, 2024)

Owners who sued together won a fix and compensation (2019)

The luxury tower was found to be sinking and tilting, and hundreds of owners sued. A tentative settlement included $100 million to drill 52 new piles into bedrock. It also paid owners for the lost value of their units, though it took years to get there.

Lesson: Owners acting together through the HOA and the courts can recover from builders for defects. But it can take years, and the problem may not be fully solved. ABC7 San Francisco (KGO): Settlement tentatively reached in lawsuit involving SF Millennium Tower homeowners (Aug 29, 2019)

Costs

Monthly HOA dues. In Las Vegas, the Review-Journal reported condo dues of about 50 cents to a dollar per square foot (c. 2016).
Special assessments after Florida’s post-Surfside law. Buildings billed owners $22,000 (Orlando), $50,000-$60,000 (Daytona Beach), and $140,000 (Miami) per unit (NBC News, 2024).
Rising dues as associations build the reserves the law requires.
Late fees, collection costs and possible HOA foreclosure if dues go unpaid. In Nevada, up to 9 months of assessments plus some costs can come ahead of the first mortgage (NRS 116.3116). Nevada HOA sales can’t wipe out a mortgage Fannie Mae or Freddie Mac owns while they’re in federal conservatorship, unless the FHFA consents.
Your own unit insurance (interior and contents) on top of the HOA’s master policy.

How people pay

Many lenders and loan programs require the condo project itself to qualify. For example, VA loans can buy a condo only in a VA-approved project.
Lenders count HOA dues as part of your monthly housing cost, which can reduce how much you can borrow.
Large pending assessments, low reserves, or lawsuits against the HOA can make a unit harder to finance and resell.
Fannie Mae won’t buy loans in projects where one owner holds too many units (more than 2 in a project of 11–20 units, or of 5–10 units within a master association, or more than 20% in a project of 21 or more). Investors buying several units can make the whole building harder to finance.

Check before you buy

Get the resale package: budget, reserve study, financial statements, and the last 1-2 years of board minutes. Look for talk of roofs, balconies, concrete, plumbing or insurance problems.
Ask in writing about any approved or proposed special assessments and who pays them (buyer or seller).
Read the CC&Rs and rules, especially rental limits, short-term rental bans, pets and renovations.
Check the master insurance policy and recent premium increases.
In California, ask for the latest balcony/elevated-element inspection report (Civil Code 5551). In Florida, ask for the milestone inspection and structural reserve study.
Confirm the HOA has no unpaid-dues liens on the unit and check for lawsuits.
Get your own inspection of the unit (water damage, firewalls between units).