How to Investigate Condominium Associations

Find out all you can about a condminium association before buying.

Buying a home is perhaps the largest financial decision most people will ever make. Purchasing a condominium, townhouse or other common property differs greatly, however, from buying a private residence. It is commonly understood that the main difference is certain restrictions on personalizing painting and other aesthetics. However, what is not commonly understood is that the condo association can be not only an obstacle, but also a financial hazard. Prospective buyers should take precautionary measures.

Instructions

1. Obtain all documents detailing the condominium association's rules, regulations and restrictions. Request the information from a representative of the condo association or ask the prospective seller for a copy. If either refuses, consider this a red flag.

2. Ask to see a copy of the association's "reserve study," which some states require and which an independent appraiser sometimes performs. The study details whether or not the association's financial reserves are adequate to meet future obligations, such as maintenance fees, and should outline such matters as insurance coverage (in the event of a catastrophic event like a flood). Though the association is not obligated to provide such financial information, refusal is another warning sign.

3. Request copies of past condo board meeting minutes, especially if your requests for the previous information went unfulfilled. In the event a financial reserve study was not completed or commissioned, past meeting minutes can provide insight into the association's financial health. It will also provide valuable information about members' concerns, board members' views and future plans of the board.

4. Ask about the financial situation of current owners. Owners behind in their mortgage payments, for instance, probably are not paying their association fees or other common expenses either, and that can have a direct impact on you. Such shortfalls have to be recouped somehow; normally it will come from other owners.

5. Find out how many units are unsold or unoccupied. Again, a dearth of paying owners will negatively impact your wallet.

6. Take a walk around the common grounds and talk to other owners. Take note of the quality of maintenance---lawn care, garbage pickup and overall physical property. Ask owners if they are happy with the maintenance company, if the board surveys them for input and if maintenance contracts are renewed automatically each year or reviewed and re-bid annually.

7. Ask owners about board members and how they conduct business. Talk to board members, if possible, or perform an online search to find out their professions and other information.

8. Research if the condo association has contracted with a management company to handle day-to-day operations and long-term planning. While many larger associations have such arrangements, it may render the association less effective and responsive to owners' concerns.

Tips & Warnings

• Hire a buyer's agent if you feel uncomfortable or incapable of investigating yourself. A buyer's agent, unlike the seller's agent, will have your interests uppermost in mind.

• If you choose to use a buyer's agent, be careful not to sign a written agreement too quickly. A reputable agent usually will work for a short time with a verbal agreement, until you're comfortable with his services. He may also agree to release you from the contract if you're dissatisfied.

References

• Don't Just Investigate Your Boston Condo, Investigate the Management Company Too
• Hiring a Buyer Agent

Resources

• Condo Association Management Blog