Check your prospective unit carefully but even more important, check the well-being of its condominium complex.
Before buying a condo unit, fully investigate the complex
By Dan S. Barnabic
Condo complexes aren’t all the same. They’re built by different builders and developers. The quality of construction often varies. Check the builder’s reputation and experience. Some condo complexes are properly governed and managed, some not. You owe it to yourself to find out before making an offer to purchase.
When buying into an existing complex, find out if it experienced undue or unexpected repair problems in the past or whether there are any anticipated future repairs. Keep in mind that the cost of future repairs will eventually come out of your own pocket via special assessments. If the condo complex is older, or a conversion from a previous rental apartment building, it is more likely to experience problems in the future.
Pay attention to how utilities are billed. If billed on a separately metered, per-unit basis, you will have more control over your energy use and monthly costs.
Some condominium complexes may be self-managed; others may employ an outside management company. If the latter is the case, research the management company’s reputation. Inquire whether the home owners association, or HOA, board members are capable of ensuring that responsible financial stewardship is in place.
Thoroughly check the estopell certificate of the condo unit you wish to purchase. It should contain facts relating to financial stability of the complex; the most recent audited financial statements; a record of assessments; any pending or anticipated legal actions; anticipated common element repairs or replacements; the amount of, or, anticipated common loan; the amount of the yearly budget and anticipated increases to reserve funds; anticipated structural or mechanical repairs; pending litigations and municipal work orders. Check out if the condo complex’s rules has restriction on pets.
Insist that any of the above information not included in the estopell certificate be given to you in writing. Don’t forget that the seller and HOA board should have nothing to hide if the complex is healthy and well managed. The facts they present should be transparent and true. If they deny access to the facts, then buyer beware! Something must be wrong.
To conduct above checks, employ a qualified condo home inspector and a knowledgeable attorney. You’ll be glad you spent the time and a few hundred dollars on it — especially if the complex you walk away from proves to have been poorly constructed or mismanaged.
Whenever possible, make an offer to buy your unit with the closing day set for at least 60 days with conditional or contingency clauses allowing you to obtain a satisfactory home inspection report, conduct legal searches, and perform due-diligence checks. This will ensure that you’re not squeezed for time when making your final decision.
Besides checking the written disclosures, always visit the complex for yourself. Knock on doors and speak to residents to determine the complex’s overall well-being. Find out if there is any discord among the members of the condo board or displeasure with the management company. Any serious discord among board members, such as frequent disagreements, or the formation of factions, are usually precursors of mismanagement and improper governance. Such situations inevitably lead to legal actions between the unit owners and the board, at the expense of all, depleting the common budget in the process.
There are no quick fixes once board members start bickering among themselves. Changing the membership of the board is a difficult and tedious task. The overwhelming majority of the unit owners, usually 80% to 85%, are required to form a special meeting aimed at requiring board members to resign.
Ask if there are problematic issues with the complex which aren’t addressed in the written disclosures. This additional information may prove invaluable to you in making your final decision about buying the unit.
- Check the facts along with your home inspector and legal expert.
- Thoroughly examine the estopell certificate of the unit you are considering and the financial yearly reports of the complex.
- Insist on information not disclosed in the written disclosures.
- Find out likely future increases in maintenance fees.
- Knock on doors of unit owners or approach them outside the lobby, before you sign a purchase contract. Ask them all the pertinent questions regarding the complex and listen carefully to their answers. If your investigation uncovers any serious adverse conditions, walk away.
This column is the ninth in a series of upcoming articles on condominium golden rules for buyers.