Hawaii Real Estate State Practice Exam

How are common profits distributed to condominium unit owners?

1. Equally among all owners

2. Proportionate to common interest appurtenant to their respective units

3. Based on individual usage of common elements

4. Held by the board of directors for future expenses

The correct answer is: Proportionate to common interest appurtenant to their respective units

The distribution of common profits to condominium unit owners is based on the principle of common interest among the owners. Each condominium unit typically has an appurtenant interest that reflects its share of ownership in the common elements of the property. This interest is often determined by factors such as the size of the unit or its location within the condominium complex. As a result, when common profits are generated—such as income from rental of common areas, fees for special facilities, or interest from reserve funds—they are allocated to the unit owners in proportion to their respective common interest. This means that a unit with a larger common interest will receive a larger share of the profits compared to one with a smaller interest, aligning distribution with ownership stakes. This method of distribution ensures that all owners benefit fairly from the collective resources of the condominium, reinforcing the idea of shared ownership and responsibility for the common areas and services.