Living in a condominium unit with an Association can take some getting used to. Decisions are made by unit owners, thus it is important to understand what issues may be facing an Association prior to your purchase. Before you buy, contact the condo board with the following questions. In the process, you will learn how responsive and organized the members are. You also may be alerted to potential problems with the property.
1. What percentage of units are owner-occupied? Generally, the number of units that are owner-occupied is important to mortgage lenders. Unit-owner occupancy 50% or under may lead to complications in obtaining a mortgage. Higher percentage unit-owner occupancy typically leads to a higher marketability of the units at resale.
2. What covenants, bylaws and restrictions govern the property? What grandfather clauses are in place? Ask for a copy of the bylaws to determine if you can live within them. Your attorney should also review the documents and master deed prior to executing a P&S Agreement.
3. How much does the Association have in reserve? Find out how much is in reserve and how it is invested.
4. Are the association fees keeping pace with the annual rate of inflation? Some boards raise fees by a certain percentage each year to help build reserves and to fund future maintenance.
5. What does and doesn’t the fee cover? Does the condo fee include common area maintenance, recreational facilities, trash collection and snow removal?
6. What special assessments have been mandated in the past 5 years? How much was each owner responsible for? Repeated, expensive assessments could be a red flag about the condition of the building or the board’s fiscal policies.
7. How much turnover occurs in the building? According to research, owners of condos in 2-4 unit buildings typically stay for a median of 5 years and owners of condos in a building of 5 or more units stay for a median of 4 years.
8. Is the condo building in litigation? This is never a good sign. If the builders or home owners are involved in a lawsuit, reserves can be quickly depleted.
9. Is the developer reputable? If this is a new development, find out what other projects the developer has built and visit one. Ask residents about their experiences and perceptions.
10. Are multiple associations involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you are buying, may require separate condo fees.
11. Are any units in foreclosure? Units in foreclosure may not be paying monthly Association fees which could impact all other owners, depending on the size of the building and reserves available.
Living in a condominium unit can be a great option for those looking for low-maintenance living. It is important to do some research and ask questions prior to purchasing a unit to ensure that you are purchasing in a managed and fiscally stable building.