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So. Why is it important to get information from the Condo Association before buying a condo?
Condo associations are legal entities that operate much like any other business and are susceptible to the same challenges. They can go broke. They can sue and be sued. They can go bankrupt. They can be mismanaged to the point of financial ruin.
So. What happens to the condo unit owners when catastrophe strikes? They are either left holding the bag or they are bagless. Unit owners rely of the association to provide various basic services depending on the by-laws, Declaration of Covenants and other legal documents. These services often include maintenance of the outside surfaces of units and upkeep of the landscape. If the association is broke it cannot pay to keep up these services which leaves the unit owners to make needed roof repairs, cut the grass, and any number of other expenses.
What if the association is involved in a lawsuit and a judgment is levied against the association that exceeds insurance coverage and the associations net worth. Who is left holding the bag? Whether or not the unit owners become directly responsible for the expense there is no doubt that the potential of reselling the unit becomes a real problem.
There are a multitude of potential hazards that a buyer can be exposed to when buying a condo unit. Is it not the responsibility of the buyer's agent to discover this information? That obviously is why the TAR form was created and why Tennessee Code Annotated 66-27-505 was created by our law makers.
Real estate agents, condo associations and management companies need to recognize the importance of protecting the buyer from potential pit falls by providing the needed information for the buyer to make an informed decision. Failure to do so can, does and will lead to damage to buyers. This damage can, does, and will ultimately affect the pocketbooks of all participants to the transaction.
I think this is good legislation but it should go a step farther and make the information disclosure a requirement. Associations and management companies should have this information readily available to potential buyers who are under contract to buy a condo that is affected by the associations actions and failures to act.
Recently the Tennessee Association of Realtors promulgated Form F-23, "REQUEST FOR CONDOMINIUM ASSOCIATION INFORMATION" to require sellers to provide more information to buyers of a condo in Tennessee.
It might just be me, but is seems this form can require a condominium association to provide a very extensive amount of information in a short time or face a $250 fine which can escalate to as much as $500 AND go to the buyer.
Furnishing all these documents a buyer can ask for can easily run to 200 pages or more, not to mention the hours of work required to assemble and deliver them.
Here's what it can ask for:
1, The name and Principal address of the Declarant (a person who develops a condominium development and has filed a declaration with the County Register Office), the Association and the condominium (the name and address of Declarant is only requested if the Association is still under Declarant control);
2. A copy of the recorded, or if not recorded then in substantially final form to the extent available, the master deed or declaration, bylaws, charter or articles of association of the Association and all amendments of and exhibits to each of the foregoing;
3. A copy of the current rules and regulations of the Association;
4. The most recent balance sheet, income statement, and approved budget for the Association (or, if there has never been an approved budget, then the projected budget). The budget must include, without limitation
i. A statement of the amount, or a statement that there is no amount included in the budget as a reserve for repairs and replacements, and whether or not any study has been done to determine their adequacy, and if a study has been done, where the same will be made available for review and inspection;
ii. A state of any other reserves;
iii. The projected aggregate annual common expense assessment by category of expenditures for the Association;
iv. The projected monthly common expense assessment, or the method of calculating each unit's share of such assessment, for each type of unit;
v. A description of any indebtedness secured by the common elements or other amenities owned by the Association or available for the use of the unit owners;
vi. A description of any lease affecting the common elements or amenities owned by the Association.
5. Minutes of all meetings of the members and/or the board of directors of the Association for the twenty-four (24) month period ending on the date of the request;
6. The current monthly assessment and any special assessment applicable to the unit in questions, and the amount of any delinquencies in any assessments applicable to such unit;
7.Any fees or assessments due as a result of a transfer of the applicable unit;
8. The amount and nature of any additional fees currently imposed for use by members of the common elements or other amenities;
9. A statement of the insurance coverage (which may be provided in the form of an appropriate certificate from the insurer) maintained by the Association that includes the types of coverage, limits, and deductibles of such insurance;
10. A statement of any unsatisfied judgments and a description of any pending suits against the Association;
11. A description of any pending suits filed by the Association other than for the collection of delinquent assessments;
12. The total amount of current monthly, annual, or special assessments for all units in the condominium that are more than sixty (60) days past due, as of the most recent available report, but in no event more than ninety (90) day prior to the date of the request; and
13. Whether the board of directors is still under Declarant control, and, if so, when that period of control ends.
Buyer understands that a reasonable fee may be charged by Association or Declarant for these documents which shall be payable by Buyer.
Pursuant to Tennessee Code Annotated 66-27-505, if the Association of Declarant (where applicable) fails to the provide the requested documents within ten (10) business days from receipt of the request, then the Association or Declarant (where applicable) shall pay a penalty of $250.00 to the party on whose behalf the request is made.
If the documents are not supplied within ten (10) days from this second request, than an additional fine of $500.00 will be owed to the party on whose behalf the request is made.
The Association or Declarant shall be responsible for all costs and fees (including reasonable attorney's fees) incurred in obtaining the information and enforcement of these fines. Furthermore, the Buyer nor any unit owned by the Buyer will be liable for any past due assessments which would have been disclosed if the information had been disclosed within ten (10) business days from the date of the second request.
However, if the requesting party had actual knowledge of the past due assessment at the time of the Buyer's acquisition of the unit, the Buyer shall be liable for these past due amounts.
If any of the request information is not provided at least 10 days prior to closing the Buyer can rescind the contract by giving notice to the Seller.
What would a "reasonable fee" that an Association could charge for providing this extensive amount of information?
Could that fee include preparation time for an accountant or other professionals?
Since this form or the law, specificially mention Planned Unit Developments (PUDs) could they be exempt from this law?
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.