Is a Townhouse a Condo in New Jersey? Fee Simple vs Condominium Ownership

Not always. A townhouse is a building style, homes attached side by side, while a condominium is a form of ownership created when a master deed is recorded under New Jersey's Condominium Act. So a townhouse can be a condo unit, or it can sit on its own lot with a homeowners association, and the deed is what tells you which one you're buying.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. Townhouses come up a lot when people are downsizing in Monmouth and Ocean County, because they often mean a smaller lot and less exterior work. How much less depends on that ownership question, so it's worth settling before you fall for one.

What makes a home a condo in New Jersey?

The Condominium Act defines a condominium as ownership of real property under a master deed, where owners own units together with an undivided interest in the common elements that go with each unit (N.J.S.A. 46:8B-3). A few more pieces of the law matter here:

• The master deed creates it. The Act applies only to property that's been made subject to it by recording a master deed (46:8B-8).
• The name says so. The master deed has to give the condominium a name that includes the word "condominium," state each unit's share of the common elements as percentages adding up to 100%, and set the way common expenses are shared (46:8B-9).
• Each unit is its own parcel. A unit is a separate parcel of real property (46:8B-4), and property taxes are separately assessed on each unit (46:8B-19).
• Common elements are broad. The definitions include things like the land, foundations, roofs and yards, unless the master deed says otherwise.

So the building's shape doesn't decide anything. A row of townhouses, a garden-style building and a mid-rise can all be condominiums, and a row of townhouses can also be plain lots.

What does "fee simple townhouse" mean, then?

Listings use "fee simple" to mean you own the townhouse and the lot under it outright, usually with a homeowners association for shared areas. Here's the catch: under the Condominium Act, a unit owner owns the unit "in fee simple" too (46:8B-3). The real difference isn't fee simple versus condo. It's this:

• A townhouse on its own lot: you own the house and a defined piece of land, and an association may own and run the shared parts under its own declaration.
• A condo townhouse: you own your unit plus a percentage share of everything held in common, which can include the roof over your head and the yard behind it.

Both are planned real estate developments under New Jersey law, which covers condominiums, homeowners associations and co-ops alike (N.J.S.A. 45:22A-23). Co-ops are a third model entirely; see co-op vs condo in New Jersey.

How does the difference show up after you buy?

Who fixes the roof. In a condo, roofs and structure are often common elements, and the association insures all common elements and structural portions (N.J.S.A. 46:8B-14). On a townhouse lot, the roof may be yours alone. The documents decide, and that's the upkeep you were trying to leave behind.

Insurance. The NJ Department of Banking and Insurance's condominium policy summary says a condo owner's policy covers property permanently installed in the unit that isn't covered by the association's policy, and loss assessment coverage is optional. A townhouse owner on their own lot generally needs a policy on the whole structure. Give your insurance agent the association's master policy before you buy.

Fees. A condo fee usually carries more of the building costs. A townhouse association fee may cover only the common areas. Compare what each fee includes, not the number. My article on what HOA and condo fees cover lists the documents to ask for.

Taxes. Each condo unit gets its own assessment and tax bill, the same as a house on a lot.

How do you tell which one you're looking at?

1. Read the deed. A condo unit's deed refers to the master deed and a unit number.
2. Look at the community's legal name. A condominium's name includes the word "condominium."
3. Ask for the governing documents during attorney review: master deed or declaration, bylaws, rules and the budget.
4. Have your attorney and title company confirm it. The listing description isn't proof.
5. Tell your lender. Ask whether the ownership type changes anything about the loan.

Why does this matter when you downsize?

Most people I help move to a smaller home are after less upkeep: fewer stairs, less yard, no more ladder on the roof. A townhouse can deliver that or not, depending on who owns the roof and the yard. As a former New Jersey home builder and remodeler, I read the documents and the building together, so you know which repairs you're signing up for before you sign anything.

See townhouse vs condo vs single-family homes in New Jersey for the wider comparison, find out what your current home should bring on my home value page, and read the Downsizing Guide for the full plan.

Frequently Asked Questions

Is a townhouse a condo for insurance purposes?

Only if it's owned as a condominium. A condo owner's policy fills in what the association's policy doesn't cover. If you own the townhouse and lot outright, your policy usually has to cover the structure too. Your insurance agent should see the master policy first.

Do condo owners own their unit in New Jersey?

Yes. The Condominium Act defines a unit owner as the person owning a unit in fee simple, along with an undivided interest in the common elements.

Do townhouse owners pay HOA fees?

Often, when the townhouses share common areas run by an association. What the fee covers depends on that association's documents.

Are condo property taxes separate from the association?

Yes. Under N.J.S.A. 46:8B-19, property taxes are separately assessed and collected on each unit.

This is general information, not legal, tax or lending advice. Your attorney and title company confirm the ownership type.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

Keep reading

• Buying a home vs a condo in New Jersey
• Moving from a house to a condo or townhouse
• The Downsizing Guide and how I plan a downsizing move
• Have a question this didn't answer? Send it to Dennis Mark.