Your offer has been accepted... So, now what? Part VII (Condo Docs)

If you purchase a condo or co-op, or a townhome or even a home with a Home Owners Association (HOA), you are entitled to review the "documents" (also referred to as the resale package or resale disclosure documents) that govern the rules/regulations/finances of the building or association you are buying into.  For the purpose of this article, we'll lump them all together and refer to them as condo docs. In the District and in Maryland, this opportunity for review cannot be waived.  And with good reason.  It is the only opportunity prior to purchase where you can assess the health of the building or association. 

Within the District, these condo docs must be presented to the buyer within 10 working days of ratification of a contract (when everyone agrees to agree).  You will then have 3 days to review the documents (In Maryland, the seller has 15 days prior to settlement to get you docs, and you have 7 days to respond).  During this time period the Buyer may cancel the contract and get his/her earnest money deposit returned.  No questions asked (rather, you don't have to provide any reason for the cancellation). 

What will be disclosed in the condo docs?

• Special assessments in addition to the regular condo fee for the upcoming fiscal year
• Status of the current owners "account" (unpaid fees, upcoming assessments, etc.)
• Balance of the reserve account and plans for spending that money
• A copy of the current budget
• Statement of financial condition
• Pending lawsuits or judgments that could impact association or owners
• Copy of current bylaws
• Policies regarding improvements or alterations to individual units (architectural enhancements)
• Occupancy limits
• Pet policies, moving day elevator guidelines, parking, visitors, move-in fees, swimming pool rules, etc.
• A description of any insurance policies provided for the benefit of the owners

An insomniacs dream!  These puppies can run hundreds of pages. 

What to look for in the condo docs?

• Pay extra attention to anything that reads "special assessment".  These are usually for big ticket items that aren't covered by the reserves, or would drain them (new roof for the building, replacement windows, etc).  Often, Sellers will offer to pay for any upcoming assessments on the books, but not always.  If nothing is mentioned, and you are feeling particularly paranoid (or, just stretched, financially), see if you can't get your hands on the last several issues of the homeowner association newsletter, or the minutes from the last couple of board meetings.  These can be pretty informative.
• Lawsuits and judgements.  A friend in the office had a client contract to purchase a condo where a worker had fallen in the elevator shaft.  The condo docs  revealed this (they have to!).  The suit had not been settled.  Turns out her client also liked another unit in another building without the lawsuit.  I think you can see where this is going.
• Be sure to check out the condo or HOA budget and reserve account.  It needs to be healthy so that it can pay for budgeted and future repairs.  If balances are weak, you can anticipate a large special assessment or a hike in condo fees to cover for the lack of funds. 
• Find out if there are any violations of any condo rules or policies on your chosen unit.  You might be responsible for fixing these violations if you become the new owner.  If you know about it, you can ask the seller for money to remedy the situation.  Once it's yours, it's your problem. 
• Things you might not understand.  If you've got any questions, ASK.  As your agent, I might not have all of the answers, but I can sure find out for you.  If you want to know why Fido can only travel in the freight elevator, or why you can't do your laundry at 3am, now is the time to find out.  Before your review period expires. 

Lastly, the documents must be read by you, the buyer.  This is one job I can't do for you.  Only you can determine what may or may not be objectionable, and act accordingly.  That's it, folks!

Part I of "Your offer has been accepted... So, now what?"  tackles home inspections and how they might play out in your home purchase scenario. 

• Part II discusses financing and what to expect.  
• Part III deals with settlement attorneys, and
• Part IV covers title insurance.
• Part V takes a closer look at home warranties.
• Part VI talks about condo docs

Coming soon... Be on the lookout for "Your offer has been accepted... So, now what? Part VIII" which will discuss pest inspections.