Joe Capote – Certified Investment Agent Specialist Expert in Real Estate Investments and Properties

I was recently asked a question about a shared wall in a PUD. What are the differences between the Condo, Townhouse and PUD? 

I find most clients tend to think of condos as a building or a complex. Condos are often mistakenly referred to as a type of construction or development. In reality, a condominium is really a type of ownership in real property. In a condominium, all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title.

For example, say I own a corner unit at one of San Bruno’s condominiums complexes, such as Shelter Creek. I would have an ownership in the interior of the unit to which I have title. I would also have an ownership (along with all of the other owners) of the property, common areas and buildings. I would be part owner of the land, but would not have an individual ownership of the land.

The FNMA “Fannie Mae Selling Guide” (3/31/87) defines a “condominium” as: A real estate project in which each unit owner has title to a unit in the building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas.

Townhouses are often thought of as an architectural style. For the most part, a townhouse is one row of homes sharing common walls. Differing from condominiums, townhouse ownership does include individual ownership of the land. Depending on the townhouse, there can be common areas, such as a central courtyard, which can be shared.

The FNMA “Fannie Mae Selling Guide” (3/31/87) defines a townhouse as a type of dwelling unit normally having two floors, with the living area and kitchen on the base floor and the bedrooms located on the second floor; a series of individual houses having architectural unity and a common wall between each unit. Town houses, or row houses, are very popular in cluster housing, and often employ the use of party walls and shared common grounds. Town house developments are often planned unit developments (PUDs), with each owner possessing fee title to the structure and the land underlying the structure; many are organized in the condominium form of ownership. The surrounding land, including sidewalks, open spaces and recreational facilities, is normally owned in common with others. The town-house concept is a hybrid of the single-family home and the apartment, and is sometimes used in areas that have height restrictions preventing highrises.

So then, what is a planned unit development (PUD)?. Most folks have heard of a PUD, but don’t associate it with an architectural or building style. It is, like a condominium, a type of ownership. In a PUD, individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the association or development.

A planned unit development (PUD) is a development that has

1. The individual unit owners own a parcel of land improved with a dwelling. This ownership is not in common with other unit owners.
2.  The development is administered by a homeowners association that owns and is obligated to maintain property and improvements within the development (e.g. grassbelts, recreation facilities, and parking areas) for the common use and benefit of the unit owners.
3. The unit owners have an automatic nonseverable interest in the homeowners association and pay mandatory assessments.The developer plans the project and seeks local governmental approval of the proposed PUD zone. He or she then organizes a nonprofit community association to provide for the maintenance of the common areas, records a declaration of covenants and restrictions, and records a subdivision plat reserving common areas to the members of the association but not to the general public.

   The PUD concept is really an “overlay” zoning which enables a developer to obtain a higher density (and sometimes a mixed-use) than is permitted by the underlying zoning. Because the buildings are usually clustered together, there is more green area left open for parks and recreation.

   DIFFERENCES BETWEEN PUD AND CONDO

   Though similar in some respects, a PUD is quite different from a condominium. In a PUD, the unit is a lot, there is no direct interest in the common areas, the community association is in corporate form, and the PUD is created by covenants in the deed or master lease. In a condominium, the unit is a space of air, there is a percentage of ownership interest in the common areas, the association of owners is usually unincorporated, and the condominium is created by recording a declaration pursuant to state condominium laws. PUD’s are also used in resort housing and even shopping center projects. 

   Clear as mud? Here’s a quick cheat sheet.

   • Condominium -  Owners own the airspace inside the unit, but share the ownership of the buildings and common areas.
   • Townhouse – A row of homes sharing common walls. Owners have individual ownership of the land. May have shared ownership of common areas.
   • Planned Unit Development (PUD) Owners have individual ownership of the building they live in. Owner’s share the ownership of the common areas.

   I hope this helps.

A relatively recent concept in housing designed to produce a high density of dwellings and maximum utilization of open spaces, this efficient use of land allows greater flexibility for residential land and development. It also usually results in lower priced homes and minimum maintenance cost.