Dear Pat, It's About These Condo Documents!
There is a condo closing on my January calendar, and Patricia Kennedy does an excellent job of answering every buyer's question regarding the huge stack of HOA documents they are presented with prior to closing. Thanks Pat!
Q: Dear Pat, I just got the resale package for the condo unit that I am buying, and there is so much stuff in here! What's important? What should I especially look out for?
A: The idea is that before you are legally obligated to buy your new place, the condo management and board must provide the buyer with information about the project and how it is run. The most important things to watch out for are first, is the building involved in any litigation, and second, a close look at the budget is crucial. Finally, you will be expected to mind the house rules, so it's good to know what they are before you move in.
In the Washington area, there are a lot of lawyers. I once lived in a large building in Adams Morgan that was God's gift to one of the area's law firms, and I moved out as soon as I could. If it is a building that is lawsuit prone, think twice.
Then look at the numbers to see how much money the association has coming in, how much they are spending, and what big dollar projects might be on the horizon. An important figure is the reserve fund, money that gets set up each month (or not) to cover anticiapated maintenance and repairs. In a well-run building, they will have funds allocated to various categories, so there will be money for a new roof, renovated hallways, mechanical issues and other things that typically and predictably need attention. If there is no reserve fund, when the need arises, they will have to pass the had with a large, lump sum special assessment from each owner. So if they are planning a roof replacement or other major expenditures, make sure you understand how they plan to pay for it.
And when it comes to money and lawsuits, are the owners generally up to date on their fees, or are there a significant number in arrears? If there are a lot of deadbeats in the building, you risk having to cover your share of what they are not paying. This can be the bad side to buying a short sale or foreclosure, especially where there are many in the building.
Finally, it's a good idea to go over the rules and regulations for the association. Some are minimally invasive. Others are not. If they have a strict no-pets policy, even if you don't have one, it will make reselling the place tricky in the future. If you have a home business, check the items regarding employees and clients coming to your unit.
Once you finalize the deal and move in, the condo association will be the boss of you, at least at some level. And keep in mind that the association and the board do have legal authority to govern the building. If it's well run, condo living can be great. If it's poorly run, um, not so great.
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