Each day I encounter people who buy a condo without conducting any type of research whatsoever. They unwittingly purchase a condominium without a clue of what the physical or financial condition of the property is.
Some condo sellers, especially those with problem plagued homeowner associations would prefer I not mention any of the issues below. They would rather see that potential buyers are kept in the dark so that they stand a better chance of selling their problem – plagued condo.
Before you enter into any agreement to purchase, the following should be thoroughly investigated:
- Condo Insurance – Does the corporation have sufficient liability insurance to protect the homeowners if someone is injured in the common elements? Does the policy include fire and other disasters that could occur? What about director insurance to protect the owners against any misappropriations of corporation funds or embezzlement by a board member or manager?
- Reserve Fund Account – Has the corporation completed a recent reserve fund study and if so what did it reveal? Are there sufficient funds in place in case major components such as windows, doors or roofs need replacement? Were there any special assessments levied against the homeowners because of insufficient funds. The presence of a special assessment is not always a bad thing. However, if it is levied for things that are normally covered by a reserve fund, it may be an indication of poor planning by the condominium corporation.
- Is the corporation involved in any litigation? Check to see if there are any outstanding debts or judgments against the condo corporation or the unit you are considering buying. Any outstanding financial liabilities incurred prior to your ownership could very well become yours once you sign the deal. In all fairness, the seller may not even be aware of any litigation that is going on regarding the condo corporation. Therefore, it is up to you to confirm if litigation is an issue.
- Did you review the condominium documents? Especially, the bylaws, declarations, rules and regulations. What about the current condo budget and financial statements? The balance sheet will indicate income and expenses. Review the monthly condominium fee and confirm what it covers. What the monthly fee covers may be different from what you have been actually told. Verify if any alterations or improvements have been made to the condo unit that could be in violation of the condo bylaws and declarations. It is not unusual for an owner to make certain changes without consulting the board. A new purchaser could end up fixing the prior owners violations at their own expense. Want to save yourself a lot of grief and maybe thousands of dollars? Take advantage of the information that is available to you and be sure to engage the service of a good condominium lawyer to help you sort through this information.
The above are just some of the most important areas to investigate before you make your final decision. What you see is not always what you get. However, I can assure you that condominium living is a great lifestyle if you take the time to check out the property you are considering. Good Luck!
Marilyn Lincoln is a condominium owner, director and author of “The Condominium Self Management Guide”2nd edition. To order a copy of her book, send $39.95 plus $4.98 shipping and handling to “The Condo Guide, 4A-385 Fairway Rd. S., Suite 128, Kitchener, Ontario, N2C, 2N9 (marilyncondoguide@hotmail.com)