Last week's column on the differences between condominiums and townhomes sparked these follow-up questions:

Q: What is the basic difference between a condominium and a townhouse?

A: A condominium is a form of ownership in which you own your unit individually, plus you have an undivided interest in common areas such as the hallways and stairs.

A townhouse is a style of construction which typically features a dwelling with two or more stories attached to other similar units by common walls.

Q: So what's the difference?

A:  A condominium form of ownership may be applied to almost any type of multi-unit construction, including apartment buildings, townhomes, duplexes or even office buildings. In contrast, a townhouse may be set up under a condominium form of ownership or each unit might be owned separately, just as a house in a typical subdivision would be owned separately. That form of ownership is called "fee simple."

Q: Why is that distinction important?

A: Because it defines exactly what you own and who makes decisions about how it will be used.

For example, in a condominium, there is typically an association board of directors who set policies for the development. Those policies can be far-reaching and affect your life.

Perhaps the board decides to restrict parking to one place per unit and replace the other spaces with flowers. If you and your spouse need to drive, you may be in trouble. Likewise, if your board decides that no owners will, in the future, be allowed to rent their unit, that may make it difficult for you to move out when you want to.

Q: Can a condo board actually do that?

A: Yes, they can, and yes, they have. Many owners are shocked to find out that their boards have eliminated future rentals from their condo communities. And under the Georgia condominium act, if the board acts within their powers under the association bylaws, it is perfectly legal.

Q: Why would a condo want to prohibit rentals?

A: Because many lenders have arbitrarily set limits to the percentage of rentals they will allow in condo communities and still allow that community to be eligible for financing. The problem is with Fannie Mae, which sets a limit of 30 percent as a maximum for units occupied by renters. If the overall community exceeds that percentage of renters, then no unit can be eligible for Fannie Mae-backed financing.

This arbitrary limit can have a devastating impact on an owner's ability to sell because it restricts any potential buyer's ability to obtain financing.

Q: So what does all this have to do with townhouses?

A: These rental restrictions do not apply to townhouse communities unless they are set up as condominiums, so many builders decided to build "fee simple" townhomes instead of the more common condo townhomes.

Q: What is the difference between a condo and a "mandatory homeowners association"?

A: Theoretically, you would get all the benefits of enforced maintenance, common amenities, a pool, even insurance and roof repairs, without the problems associated with a condo. So even if rentals exceeded 30 percent, ordinary financing would still be available.

Q: Why do you use the word "theoretically"?

A:  Because it is hard to make a homeowners association mandatory. Under a condominium, the association is granted strong powers to make decisions for the good of the condo. Those powers include the ability to place liens against the property of owners who refuse to comply with association policies or fail to pay fees on time.

Because these liens affect the title of the property, they are much more powerful enforcement tools than are generally available to a "neighborhood association." Some attorneys have tried to craft documents that meet all needs, but only time will tell if they have succeeded.

The bottom line is that any prospective buyer of a condominium unit needs to be aware that it is possible for their association to prohibit rentals, either now or in the future. If the ability to rent the unit is important or even may become important one day, prospective purchasers need to consider the power vested in the condo board of directors. That power can affect your rights.

 John Adams is a broker and investor. He hosts the "John Adams Radio Show," a call-in program dealing with homeownership and real estate, from 1 to 3 p.m. Saturdays on NewsRadio 640 (WGST). For more real estate information or to make a comment, visit www.money99.com.