I usually don't list or sell many condos and I'm so glad that I don't. I've had a few condo listing experiences that really have made be think hard about ever buying a condo.  Huge special assessments could be lurking in the wings with no readily available way to know about them, at least the way things are currently in Georgia.

We had a listing a few years ago in a condo complex where the HOA was considering making a $15,000 assessement against each owner in order to correct some siding issues.  The units had an average value of around $160,000.  The HOA was divided.  Some wanted to go forward while others wanted to hold off and try to make repairs for less.  After a year of going back and forth, it was finally voted down by a small margin.  While this was on the table, it was almost impossible to sell these units.

Once the measure was voted down, we were under no obligation to disclose that there was such a large assessment that got voted down.  If a prospective  buyer called the president of the HOA they would get the same story, there is no currently pending assessments.  If they called the management company they would also be told that there is no currently pending assessments. 

The problem wasn't going away and was going to have to be addressed sooner or later.  But if you were a buyer, you wouldn't know that there was a major problem with the siding on many of the buildings. You would get an inspection of your unit but you would never inspect every building in the complex even though you would be sharing in the expense of repairs for any other building in the complex.  The situation was finally taken care of through an increase in the monthly fee.  But it could have been the $15,000 lump sum.

I just sold a condo in a small community for around $500,000 and they had just voted down an assessment of $40,000 to repair siding.  That's $40,000/unit!   It was a very close vote so it might have a chance next time around.  My seller and I thought it best to disclose this fact but we were under no legal obligation to do so. Any prospective buyer would be told that there is no currently pending assessment.   Wouldn't that be a big surprise after you move in to your new condo.

I really think that there should be a law that requires the minutes to the last year's HOA meetings to be disclosed to any prospective buyer.  To me, it is such a pertinent fact that I would want to know if I were a buyer. 

When you are buying a condo, you are buying a piece of all the problems throughout the community.  Make sure you do your due diligence.  Make sure you talk with several current owners too. If you are lucky, you just might be able to get the real scoop and avoid any major surprises. 

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34 Comments on Condo Buyers Beware. There Could be a Lurking Assessment

20 Most Recent Comments Displayed Show All

FEB
01
2007
188,185 Points 31 Featured Posts Outside Blog

Our attorneys have advised us not to touch the HOA documents, to have a clear path from the management company or board to escrow and from escrow to the buyer directly.  The reasoning behind this is sound.  The documents cannot be tampered with, will not be stale and the liability is removed.  If you accept documents from the seller and turn them over to the buyer they may not be the most current docs.  If a major decision has been made since that time like no more pets in the building and your buyer has a pet, it could be a huge problem. 

I always give the buyers agent the phone numbers of the board members and advise them to call and ask any questions they like.  I want them and the buyer to be comfortable with the purchase.

If there are any upcoming assessments my sellers are advised prior to listing that these will need to be resolved prior to the close of escrow. 

Disclose, Disclose, Disclose, because disclosure will set you free.

 

11:34pm • #15
FEB
02
2007
1,156,252 Points 29 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master
Good advice, I too find it hard to get relevant info from management company and the sellers usally can't find  documents.
12:44am • #16
190,820 Points 7 Featured Posts Outside Blog

Tim,

Thanks for the post. I also agree with Ann's approach. I do not handle many condos/coops. However, when I do, I ask that the buyer's attorney request information on the number of owners in arrears with their association dues as well as, the amount. Because at some point the obligation gets redistributed and the new owner could find themselves with a much larger monthly bill.
4:53am • #17
298,603 Points 49 Featured Posts Outside Blog
Great post Tim.  Another reason why a buyer should work with a REALTOR and one who works that particular niche.  Even an otherwise good agent can miss something like this.  Thanks!
4:55am • #18
424,614 Points 45 Featured Posts Outside Blog Attended Rain Camp

Thanks for all the good suggestions.  I'm surprised that so many ask for the HOA minutes.  We always ask for all the other things but I have never ever had an agent request the minutes to the HOA meetings.  I can see first hand why these are so important.

Maggie, you are so right about the importance of really knowing a particular niche. If you don't do condos much it is so easy to forget about some things.
6:21am • #19

I think Laurie has got it right.  I do business in downtown Chicago where a good portion of our volume is condos.  Our Association of Realtors has a Rider that asks for everything but the age of the kitchen sink.  Give all the information to the prospective Buyer and allow them to do the due diligence in their purchase.  In information, I mean: Condo management phone numbers, Board members numbers, or even better have their attorney due the work.  In Illinois, we as agents have little to do with the Title Company and Attorney's are a part of 99% of our transactions.

 

Tim Mertzlufft

 

http://www.openingdoorschicago.com/
6:50am • #20
Yes, those assessment can really be an issue in the buying/selling process.  I saw more special assessments last year than ever.  My Marriott timeshare even passed one on to the owenrs.  The best advice is to become involved in the management of your condo.  I feel that one of the condos I presently own out of state is governed by folks that have little regard for costs being passed to owenrs.  When I bought it, my regime fee was $434 a month and 2 years later it is now up to $600.  Where do you go from there?
7:27am • #21
yup, very true we are seeing the same thing here at the beach..Unreal     
10:34am • #22
131,091 Points 24 Featured Posts

Tim,

 I sell a lot of condos and as noted by Jeff Dowler we get docs directly from HOA in CA and while they are slow it does seem to work along with copies of HOA minutes for last 12-18 months.. I tell my sellers  they must have this stuff  when we list... as to your comment about a pending assessment...Good for you about disclosing a possible pending assessment..You were doing the right thing...   if it is being  discussed it needs to be disclosed....not disclosing items like this is what leads to lawsuits later and  gives agents a bad reputation for not being honest..

11:18am • #23
424,614 Points 45 Featured Posts Outside Blog Attended Rain Camp

Kaye, the problem comes when the seller doesn't want to disclose, the law says you don't have to disclose, and you feel awful that the buyer isn't aware of such an important item. 

With an agency relationship wouldn't I be wrong to go ahead and disclose it when the seller doesn't want to?  That's why I think it needs to be in the law.
12:32pm • #24
3 Featured Posts
In Washington State, it is required that pending and on-going assessments are disclosed by the seller so if you live in a state that doesn't have those requirements in the listing agreement and the purchase and sale, you may want to notify your local multiple listing service and board that such disclosures should become mandatory.
4:17pm • #25
1,949,322 Points 477 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Sounds like a condo assn with inadequate reserves.  THAT should be a red flag when selling those things.  I wouldn't sell them.

Lenn, Homefinders.com

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5:06pm • #26
131,091 Points 24 Featured Posts

Tim,

Don't know about where you are at but here the agent must disclose any pertinent information that may affect the sale.. if I had that type of information and didn't disclose it I could be sued and found liable.

I always tell my sellers that they can never disclose too much but they can disclose too little which is what will put them in court.  Most of them get it...
6:19pm • #27
FEB
03
2007
199,383 Points 5 Featured Posts
Thanks for the advice Tom, I like the idea of the HOA minutes from the past year being available to the buyer to review that way they know if any special assesments have been discussed re:  siding etc...
12:27am • #28
NOV
06
2007
I found this thread through a Google Search. It directly relates to an experience I had in CA. I recently sued my seller for non-disclosure of material facts regarding talk and voting of a major siding assessment. I prevailed! About 6 months after I purchased my condo, the HOA scheduled several meetings regarding issues they've been experiencing with the Siding for many years. Many units had rotted trim and siding areas: some had new leaks around the windows.  The assessment turned out to be $32k (per Unit X 12), which is very realistic for a new exterior siding project, especially in CA. The HOA also voted that new windows are mandatory, since the siding was being redone and it proved to be cost effective at that time. 

My agent failed to provide me with current meeting minutes. He gave me a few meeting minutes dating several years back. The most current one, at that time, was the kicker! While in Escrow, the HOA was talking about a $10k assessment; which evolved to a $32k assessment once everything was agreed upon.

I m going after the Selling Agent Next!

If you know of any talk pertaining to an assessment, disclose it! Otherwise, ask your buyer to request the HOA docs and have a form signed that you requested them to do so. That may help waive your liability. Or, you can be a Super Agent and review all the HOA doc on behalf of your client. That's the most ethical and professional thing to do, I think.

e

PS- Is there a law in CA that states that an agent must request the HOA to provide a minimum of 6-months of meeting minutes?
Enrique
10:14pm • #29
NOV
07
2007
188,185 Points 31 Featured Posts Outside Blog

When representing condo buyers I ask for 1 years worth of minutes and the financials along with the CC&R's, I am in California.  A couple of years ago the attorney for the brokerage advised all of the company Realtors not to touch the CC&R's or any other paperwork being transferred from any Condo Board or Management company; to make certain that there was a clear path of untainted documents.  He further advised not to accept any paperwork directly from the seller or any other party as it may not be the most current and could be tainted.  

Since that time all paperwork goes directly to Escrow and then directly to the buyer.  I advise my buyers to bring the paperwork to me to review with them, my buyers are also advised that they must read and understand everything included in that paperwork and the importance of it. I have not had any problems thus far. 

 
12:50am • #30
424,614 Points 45 Featured Posts Outside Blog Attended Rain Camp

Enrique- Thanks for your story.  It's pretty scary what can be hiding beneath the surface.  I'm always very nervous about this stuff when I'm helping a buyer to buy a condo.

Laurie- Great advice.
8:26am • #31
NOV
28
2007

Wow!  I live in the Pacific Northwest, specifically Vancouver, Canada, and own my condo.  Condominiums here are governed by the BC (British Columbia) Strata Act (see link below), and althoug cumbersome it severs it's purpose.   Having said that, I'm shocked at how difficult it is in your state to get disclosure or access to minutes.  Here it's considered a standard subject to an offer to request and receive two years of strata minutes.  As an owner I receive copies of every meeting that takes place, and if I choose not to keep them (which is recommended in case I sell and they're requested by a buyer) I can always order a set for a standard $100 fee.  We also are required to do a disclosure on significant issues.  For instance in our building we need a re-piping job, due to the age of the building.  The special assessment has been voted down twice now by the owners, but the condition of the pipes would need to be disclosed to future owners...in this case they would be expected tp do due dilegence though, which translates into requesting the minutes.  As an example, recently someone had purchased a unit our complex, but had not requested the minutes, and as a consequence did not realize that significant work needs to be done...so sad, to bad!

 FYI, here's the link to the strata act  http://www.qp.gov.bc.ca/statreg/stat/S/98043_01.htm
1:25pm • #32
Sorry, my fingers are not typing well today... in me previous posting severs it's purpose should read serves it's purpose.  Just one other thing: I'm not sure about Washington State, but because of the deteriorating building codes in British Columbia, our biggest challenge has been leaky condos.  This is something that is the norm in buildings built between 1984 and the late 1990s.  People have gone bankrupt, and literally lost everything they owned over this, regardless of their socio-economic background.  Those who decided to try and stick it out have been faced with special assessments upwards of $100,000. It's one of those things that's left a bad taste with many people here.
Jennifer
1:43pm • #33
APR
28
2008
458,367 Points 27 Featured Posts Outside Blog Called Shot Master

I specialize in the Los Angeles Condo Market and I always ensure my clients read and understand the Homeowner Association's CC&R's, Rules & Regulations, Bylaws, Minutes of Meetings, Financial Statements, as well as a current Reserve Study of the building.

A lot of agents do not even encourage their clients to read the Reserve Study - but by doing so, unexpected or surprise assessments can be avoided. 
11:31am • #34

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