How to Dig Deeper Before Closing on a Condo Purchase – Part 1
As an attorney who has worked on both the buyer and seller sides of real estate transactions and understands the inner workings of high-end condominium associations in South Florida, I have key insight into unique considerations that buyers should weigh before closing on a condominium property. The concept of and rights associated with condo ownership are much different than owning a single family home. When you’re buying a condo, you’re essentially going into business with strangers (all the other unit owners in the building), so you need to review certain records and governing documents of the association, before you close.
Has the building been turned over to the unit owners?
Newly constructed buildings are typically still “controlled” by the developer until certain unit sales thresholds are met—thereafter, the “control” of the building is turned over to the condo association, per Chapter 558 of the Florida Statues.
If the building has been turned over from the developer to the unit owners, then potential buyers should strongly consider evaluating the following questions before plunking down millions of dollars on a new condo.
Has the association hired an engineer/expert to prepare a “turnover report” listing the purported construction/design defects and deficiencies in the building?
If yes, review the report to see how extensive or severe the purported defects and deficiencies are. Get an understanding of whether there are issues that might impact your specific unit (leaking sliding glass doors, railing and balcony problems, etc.) and if there are serious problems that might cost millions of dollars to fix (severe structural issues in the garage or pool deck, incorrect windows throughout the entire building, etc.).
Has the association already commenced a lawsuit against the developer and construction parties in connection with the defects?
If yes, has the Association budgeted for the potential high cost of legal fees and hiring experts? Does the Association plan on passing a “special assessment” in the near future in connection with funding the lawsuit—and/or to fix the items that the developer and construction parties do not resolve?
When buying a new condo, you will want to review the turn over report to gain an understanding of the building’s potential construction/design issues, and thus the financial liabilities you may be assuming as a member of the association (especially if the items are not resolved by the developer post turnover).
Stay tuned for Part 2 of this series where I will discuss even more considerations that you should assess before buying a condo.