avoid a condo disaster
Avoid Disaster – Ask the right questions before buying a CONDOMINIUM!
Most people know what to look for when considering a house but for a condominium purchase, there exists an additional layer of questions and considerations. You will own the inside of your unit (and perhaps a deck) but you will only own a percentage interest in the common areas, both exterior and interior (like a community room). You alone cannot make decisions about the common areas, so it is critical that you are comfortable with the current state of affairs or that there are funds in the budget for any upcoming repairs or improvements to the common areas.
If the roof will need replacement in 2 years and there is not money allocated in the budget for this, it is likely that you will be paying a special assessment. This is why it is important to consider the entire association. The roof over your unit might be fine but if the roof on the next building needs repair, you are just as responsible as the unit owner who lives under the leaking roof.
Condominium documents are, for the most part, written in legalese so you should have them reviewed by an attorney. The one part of the documents that you CAN understand and that affects your everyday living is the Rules & Regulations. Before making an offer, review these rules and see if you can live with them. If you have a dog and the rules say you cannot have any pets, this is not the right home for you! The Rules rule!
NOTE: Your percentage interest will likely determine your condo fee and how much you will pay for any special assessments. Special assessments are levied by the association when work will be done and the funds will not come from the condominium reserve account. Larger associations are required to contribute a certain percentage of the monthly fees to a reserve fund but smaller associations may not even have a reserve fund.
Questions to ask: * What’s included? Parking space? Storage area? Exclusive use area like deck or porch.What are the current monthly fees? * Are there any other monthly fees such as a parking fee? * Are there any outstanding special assessments? Is it a lump sum or financed? Will it be paid off by the seller? * Is there discussion (see board minutes) of anticipated special assessments or increase in condo fee? * Are there any repairs, maintenance or capital improvement projects in the near future? Are there estimates in place in place for these? * Is there a reserve account? If so, how much is in it? Is it accounted for in the annual budget? (Most lenders want to see 10% of condo fee going into a reserve fund.) * Are there any problems like neighbor disputes going on? * Are there any rights of any entity, like a redevelopment authority, to receive a portion of any future sale proceeds? * Are there any current or threatened law suits against the association? (plaintiff or defendant) * How many units are owner occupied vs rented? * How many units are “affordable units”? * Are there any unit owners behind on their monthly condo fee payments? * Are there any fire escapes or connecting balconies that need to be certified? (Boston only) * Is the project complete? Will additional phases be added and how will that affect current owners? * Will the association pass muster with lenders? (Ask your lender about the condo questionnaire.) Documents to have your attorney review: * Budget (current, past year and proposed if there is one) * Current balance sheet * Minutes from the two most recent board meetings (Lenders often want to see all from last 6 months.) * Declaration of trust * Master deed and unit deed * Plus any ammendments and other related documents like Rules and Regulations