Q & A Series – Part 3
Q: What’s the difference between a freehold versus condo townhouse? – Amanda M.
Ah, the freehold versus condo townhouse question – a personal favourite of mine. The difference between a freehold and condo townhouse has to do with land ownership. In a freehold townhouse, you own both the home itself and the plot of land it sits upon. However, in a condo townhouse, you would only own the interior of the unit. The outside, often including the roof, windows, driveway, lawns etc. (called ‘common elements’), would be owned by all of the unit owners under the formation of a condo corporation.
In this sense, a freehold townhouse is no different than the semi-detached or detached homes you’re used to and probably grew up in. You would take care of and be solely responsible for all improvements and maintenance of the property. The condo townhouse, on the other hand, is really no different than a condo apartment that I bet you’re more familiar with. The main differences between the condo apartment and condo townhouse is that there are typically less amenities than an apartment, however you’re granted the living space of a more traditional home. Maintenance fees (fees paid each month by each unit owner to help pay for all of the costs associated with maintaining all the homes and the grounds in the complex) tend to be lower on condo townhouses than apartments. In fact, some condo townhouses have a very small fee (usually less than $90) to simply take care of basic maintenance like building insurance, snow removal, and landscaping. In this case, condo townhouse owners would be responsible for exterior maintenance (roof, windows, etc.). Combining that with typically lower prices than freehold townhouses, makes the condo townhouse a very attractive and affordable alternative for many families.
In the end, the main difference is land ownership and your preference on how to maintain the property. Condos have monthly fees that you consistently pay whereas freehold homes will see large payments at once to take care of improvement issues. Most people prefer to maintain full authority and ownership of their home, so if they can, generally opt for the freehold option.
A Word of Caution
Before purchasing a condo townhouse, you really want to do your research on the property management company that has been contracted to manage maintenance. A bad property management company can send monthly maintenance fees soaring which can really hurt resale value for the unit owners.
Am I Really Buying a Freehold Townhouse?
One other thing to keep in mind is that new-home builders are often marketing condo townhouses as freehold townhouses. They do this by simply saying there is a small fee for items such as snow removal and landscaping. However, in the vast majority of cases you are still purchasing a condo townhouse. You will know because you will receive a booklet with the by-laws of the condo corporation along with a status certificate once you take possession. Now, you should really know this upfront on signing but if you’re ever confused about the status of what you own, those two documents (along with checking your title) will serve as the biggest pieces of evidence.
Why are builders marketing condo townhouses as freehold townhouses? It’s simple. The word condo has a negative stigma for those wanting pure homeownership. But, why does the builder not just build freehold townhouses then? This is because the builder can build a larger amount of homes under the condo townhouse designation while still receiving very close to the same market value as ones that are pure freehold. They can build more homes on their land and realize more profits. Meanwhile, the homeowners feel like they are getting a freehold home but that small maintenance fee tends to grab your attention 10-15 years down the line.