Purchasers of condominiums can make a more informed decision if they do their homework before purchasing a condominium. Under the sales contract, a seller typically provides the buyer with, among other things, copies of the Declaration, the By-laws, the House Rules, minutes of past Board meetings and the reserve study for the condominium association.
Admittedly, these documents are not the most exciting reading, but there is much information in these documents. They provide valuable information as to what you are buying, how the association is managed, the financial strength or weakness of the association, and insight into your rights and liabilities. If you do not want to or cannot read these documents yourself, we suggest it would be worth your while to hire someone to read these documents before you complete the purchase of the condominium.
The Declaration provides information about what you are purchasing and your responsibility. The Declaration defines the physical boundaries of the condominium. This is often important in determining who is responsible for such things such as leaks, who is responsible for the repair and who is liable for any damage caused by the leak.
The Declaration sets forth each unit's percentage of common interest. The percentage of common interest is used to determine the owner's voting percentage and share of the building maintenance fees.
In a condominium, there are areas which are available for use by all people. These are known as common elements. Examples of common areas are a swimming pool, the lobby and the elevators. The Declaration will indicate what restrictions, if any, there are in using the common elements.
Condominiums may also have limited common elements. Examples of limited common elements are a unit's parking stall(s) or storage area.
A condominium is a community of owners. The By-laws are the procedures under which that community operates. It is important to know the rules of the game.
The minutes of past Board Meetings might provide insight as to whether the Association is dealing with issues such as major repairs or litigation. This might suggest prospective future costs to the condominium owners. The buyer should also review the current budget, the reserve study and the financial report of the auditor. The reserve study will provide insight into the moneys the association has in reserve. Does the association have sufficient reserves for future maintenance and for major projects such as replacing the roof of the building? Will the association have to assess owners to raise funds for these projects? Sometimes assessments can be quite substantial for things such as painting the building or a major repair.
A buyer should also check the extent and number of delinquencies that a condominium association has to assess whether it is financially well managed or whether other owners might be required to pay additional maintenance fees due to the non-payment by delinquent owners.
If you are interested of buying a condominium, these documents should be reviewed so that you can make an informed decision when you purchase your condominium. |
