How to Dig Deeper Before Closing on a Condo Purchase – Part 2
As I discussed in Part 1 of this series, when you buy a condo, you’re essentially going into business with strangers, thus, before you close on the purchase, you need to review certain documents to get a better understanding of how the condo building is run. For instance, you should review the condo association’s governing documents because they stipulate your rights and obligations.
Do you know your voting rights (as an owner/member of the association) on key issues?
You would not close a business deal without reviewing a corporation’s shareholder/operating agreement and knowing your rights as a member/investor in relation to those of the company, the board of directors, etc. Similarly, why would you consider spending a significant sum of money (perhaps the largest purchase of your life) on your condo purchase without doing due diligence?
There is a reason buyers sign a form confirming they have received all of the condo association’s governing documents—these documents are essentially the contracts that spell out the rights and duties of the owners and association.
Key points to locate and review in the condo’s governing documents include:
(i) Does the board have the right to pass a “special assessment” charge to the unit owners by a board of directors vote only, or is the unit owners’ approval required?
(iii) Are the special assessments capped at a certain amount per year or is the special assessment amount unlimited?
(iii) How many votes are required to approve a material alteration project to the common elements or amenities of the building (i.e., a new $2 Million Dollar lobby renovation and upgrade)?
These are just a few of the considerations that prospective buyers often fail to evaluate before closing and instead learn down the road once they are already owners in the building and stuck with these arrangements. We have extensive experience working on various aspects of real estate transactions and can advise you on these issues as they relate to purchases, sales, and closings.