What is a Condominium?

A Condominium is generally real property (land and buildings) consisting of "units" which are owned by individual persons or entities and "common elements" which are owned in common with all owners. The units are equivalent to privately owned, improved real property. The boundaries of a unit may be defined to include the exterior walls, roof and foundation of a building, or may be less inclusive and extend to the unfinished wall, ceiling and floor coverings of the living area. The common elements are those parts of the real property and improvements other than units. They are typically owned by the unit owners collectively, each unit owner receiving by deed a percentage of the totality of the common elements. Common elements are usually divided into two types, "general common elements" and "limited common elements." General common elements are those parts of the real property and improvements which are for the use and benefit of all unit owners. Limited common elements are those parts of the real property and improvements which are reserved for the exclusive use of one or more, but less than all, of the unit owners within the condominium. Examples of typical general common elements are parking lots, recreational facilities and elevators. Examples of typical limited common elements include porches, patios and front and back yards in townhouse settings.

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Why a Condominium?

As the costs of land and construction escalate, it becomes more difficult for individuals to own their own homes and recreational facilities. A group of people (unit owners) who live closer together and share the cost of maintenance can often more easily afford to own real property.

Just as important, in our busy society, people often desire fewer maintenance responsibilities and more recreational facilities. A condominium can offer this by providing services such as exterior maintenance, lawn care, landscaping, and snow removal; and by having all property owners pay a proportionate share of the costs for acquisition, maintenance and upkeep of facilities.

Finally, ownership of a condominium gives the owner tax advantages, such as interest and real estate tax deductions, which are not available to renters.

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What is the Maryland Condominium Act?

The Maryland legislature has adopted laws to create and govern condominiums. The Maryland Condominium Act regulates, in great detail, most aspects of the condominium. It is codified and can be found in the Annotated Code of Maryland as part of the Real Property Article, Title 11. The Condominium Act is refined by the amendments from year-to-year.

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What are the Condominium Documents?

The "Articles of Incorporation" for an incorporated "Council of Unit Owners" establishes the Council as a legal, corporate entity.

The "Declaration" is a written statement by the owner of the land and buildings which constitute the condominium, subjecting the land to the Maryland Condominium Act. In part, it describes the land included in the condominium, the units, and general and limited common elements. It also refers to the record plats and states whether or not there will be any future additions to the condominium. It includes covenants and restrictions regarding use of units and common elements. In addition, there is typically an exhibit to the Declaration stating the percentage interest that each unit has in the common elements and the votes assigned to each unit.

"By-Laws" are an element of the Declaration which describe and provide for, among other things, the Board of Directors, officers, assessments, insurance requirements, management agents, procedures for meetings, voting rights, and adoption and enforcements of rules, regulations and amendments.

The "Condominium Plat" is a series of drawings showing the location of the condominium and describing the units and common elements.

All of the above documents are prepared before you purchase your unit. All but the Articles of Incorporation are recorded among the Land Records of the county where the condominium is located. Purchasers of residential condominium units, both new and used, must receive, as a matter of law, a disclosure package from the seller or management agent which includes copies of most of the documents set forth above, as well as other information. Maryland law also gives the contract purchaser of a condominium the absolute right to rescind (cancel) his/her contract within a short time after receiving the required disclosure package or any amendment to the disclosure package. If you proceed to settlement without the complete disclosure package, you waive your right to rescind. It is important that you read this information and understand it before or immediately after you sign your contract to purchase your condominium. A trained lawyer can be of great assistance in the preparation, interpretation and explanation of these documents. By gaining a full comprehension of these documents, you will better appreciate the type of lifestyle in which you are investing.

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How is a Condominium Run?

Typically, a condominium is run by all of the unit owners (initially it may be run by the developer, also known as the declarant) formed together as the "Council of Unit Owners." The Council may either be a corporation or may be unincorporated. If it is incorporated, there will be a document entitled "Articles of Incorporation" filed with the Maryland State Department of Assessments and Taxation in Baltimore. Another term commonly used to refer to the Council is "Community Association."

The unit owners constitute the membership of the Council of Unit Owners, and are analogous to stockholders of a stock corporation. They elect representatives to the "Board of Directors." This Board of Directors selects the President, Vice President, Treasurer, and Secretary from amongst the Unit Owners. The Board of Directors and Officers make the day-to-day decisions for the condominium.

In most cases, the Board of Directors may delegate its authority to manage the day-to-day operations of the condominium to a professional "Management Agent." The Management Agent is answerable to the Board of Directors, and acts only upon the authority conferred unto him/her by the Board.

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Where Does the Money Come From?

Unit owners pay annual "Assessments" into a general fund. Typically, Assessments are billed and paid monthly, but could be payable quarterly or even annually. The amount of the initial assessment is established by the developer and is stated in a proposed annual budget. Subsequent annual budgets are based upon past experience and anticipated expenditures. The Board of Directors commonly proposes the budget and the Council of Unit Owners approves it. The budget includes costs for maintenance, common utilities, planned additions, administration and reserves for future major expenditures. The amount of annual condominium fees assessed to each unit owner could be typically based upon the ratio between the square footage of the particular unit to that of all of the land in the condominium, or could be a uniform amount paid by all unit owners regardless of size of unit. Failure to pay the condominium assessments may result in a lien being filed among the Land Records. Lawsuits and costly foreclosures may result if assessments continue to remain unpaid. Needless to say, management of a condominium can be a big business.

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Condominium living is a lifestyle in which property owners join together to own and maintain buildings, recreational facilities, and other lands and improvements for their joint benefit. We can explain those parts of your condominium documents, highlighting potential issues and assessing which areas have the most direct impact upon you. The more informed you are regarding your responsibilities and rights, the more you will enjoy and benefit from your condominium experience.

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