How to Dig Deeper Before Closing on a Condo Purchase – Part 3
As I discussed in Part 1 and Part 2 of this series, buying a condo requires a different kind of diligence than buying a single family home, because you’re going into business with strangers. You need to review documents that will clarify how the condo building is run and what rights you will have in deciding how it is managed. These rights and management issues include responsibilities for repairs and the annual budget of the association.
Know your obligations regarding what repair responsibilities you bear and rules that affect your intended use of the condo. Make sure to review the association’s “Frequently Asked Questions” (yes, that is actually the legal name of the document and each building is required to have an updated copy available), governing documents—and especially the rules and regulations. These items will provide valuable information regarding guests/occupancy, leasing, and parking rights. Knowing these rules and restrictions before you purchase can ensure that you are buying exactly what you intend to buy for the uses that you are intending.
Ask the condo association for a copy of the annual operating budget. You should review the association’s current operating budget to get an understanding of how much money is being spent (and thus charged to the unit owners in the form of assessments). Is the association funding the reserve account for future repairs of the key components of the building (such as the roof, pool, elevators, parking garage, painting, etc.)? Some associations elect to not fund the reserves at all or only partially fund the reserves from year to year (yes, this is legal as long as the proper procedure and approvals are obtained). If the reserves are not being funded, there may be a (potentially large) special assessment in the future to account for that deficit if/when the association is required to undertake a large repair project.
As a licensed title agent, I handle all aspects of high-end residential and commercial real estate closings and financing. At Haber Law, as experienced South Florida real estate attorneys, we frequently serve as outside general counsel to condo and HOA associations across South Florida (including Fisher Island, Miami Beach/South of Fifth, Brickell). We have a 360 degree view of the issues because we have extensive experience in all aspects of community association law, real estate closings, construction law, and real estate and project financing and can help you with all your real estate needs.