Difference between condos and apartments
June 19th, 2010
To help you to better understand the difference between a condominium and an apartment building I need first to clarify the definition of the term of “condominium”. For example, most people in Thailand commonly associate the term “condominium” with the concept of an “individual unit” into a “multiple unit building” generally a high rise that may only be sold freehold but condominium ownership is actually far more than this.
Legal Definition of a Condominium
The first thing to understand is that the term “condominium” does not describes what a property “look like” but actually serve to defines the “physical rights” attached to said property.
The second thing to understand is that while Thailand only knows for the time being the concept of vertical condominium (a building divided in units) condominiums ownership is more diverse than this. It may for example also be horizontal (a housing project) and when horizontal it may then be detached or not (separate housing versus townhouse housing project). Finally while most condominium units happen to be residential any type immovable property may be sold as “condominium” including residential buildings, offices buildings, parking’s, housing projects.
Is the Leasehold vs Freehold Criteria Relevant?
Thirdly, there are also many people who believe that the main difference between condominium and apartment is that
(1) A condominium unit may solely be owned freehold while an apartment unit may only be leased, and/or
(2) Condominium projects are developed by developers that own the project land freehold while apartment buildings are developed by those that lease the project land.
Now as a matter of fact the two above information are also incorrect.
As to the first affirmation, it is actually the contrary; an apartment may only be leased while a condominium may be owned freehold or leased.
As to the second affirmation, a developer may build an apartment building either on land the developer owns freehold or leasehold. It is the same with condominium projects that may in many countries be built on freehold or leasehold land (not in Thailand however where the condominium developer must own the land and the building freehold to apply for the condominium license). But in many countries, for example for the US in California condominium rights are not always synonym of perpetual rights of ownership (freehold). Condominium Rights “(…) may, with respect to the duration of its enjoyment, be either (1) an estate of inheritance or perpetual estate, (2) an estate for life, or (3) an estate for years, such as a leasehold or sublease hold. Calif.Civil Code 783”.(Black’s Law Dictionary Vol.1 page 267: Henry Campbell). In other words in the United States it is possible to develop leasehold condominium projects that is to say a condominium projects that are built on leased land. In a leasehold condominium the buyer’s rights on their unit and on the common area will be limited in time to the duration of the developer main lease agreement. In other words the condominium units owners in a leasehold condominium will not received freehold deeds but leasehold rights for a limited duration.
This is however as already explained above not applicable in Thailand where a developer may only apply for a condominium license if he owns the land and the building (Section 6 of the Condominium Act) but I needed to make the point to show that the leasehold/freehold criteria is not what distinguish a condominium from an apartment building.
Finally, it could also in theory possible for a single purchaser to own every individual units in a condominium development and to operate the condominium building in the same manner as an apartment development that is to say to lease the units out instead of selling them. Vice versa, it is also possible for a developer to purchase an apartment building and to convert the individual units to condominiums by bringing them up to the standards required by the condominium act and then to offer them for sale.
Therefore the leasehold/freehold distinction is not a helpful criterion to distinguish apartment and condominium buildings.
Difference between the physical rights attached to the purchase of a condo vs apartment
What really set condominiums apart are as explained above the physical rights associated with the purchase. What makes condominiums different from apartment’s projects is that legally a condominium is defined as “an estate in real property consisting of an undivided interest in common in a portion of a parcel or real property together with a separate interest (in Thailand a Or Chor 2 Deed) in space (such as an apartment, a store, an office) in a residential, industrial or commercial building”. Therefore condominium ownership is a sort of mix between the separate interests attached to an individual unit together with an interest in a portion of the common property.
In other words a condominium is the sum of (1) all the separate interests (whether freehold or leasehold interests) representing each of the separate units individually owned and (2) of the deed (or leasehold interest) that encompasses the interest in the common property that is collectively owned. Being specified that the portion of the undivided interest in the common property is not an interest in a specific determined area of the common property but a percentage of the common property as a whole.
To the contrary an apartment building will carry a single deed (if built on freehold land)/or master lease (if built on leasehold land) that encompasses the entire property as a whole. In an appartment building, the rights on the building and the common property (including facilities) will be into the hands of a single person (the landlord). And the individual buyers that purchase appartment units (in leasehold) will not be confered any rights at all on the building Common Property.
In our next post we will discuss what are the practical consequences on a buyer point of view of the legal differences between a condominium and an apartment building.
Note: This post is an excerpt of Rene Philippe Dubout second edition of his book “How to Safely Buy Real Estate in Thailand” that was first published under the title “How to Purchase Real Estate Offshore Safely: The Case of Thailand” published in february 2009.
About the Author:
The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.