What to Look for in the Condo Documents
Condos offer a wonderful low maintenance lifestyle and are often a more affordable option. When you purchase a condo, you are also investing in the association that oversees the property. Before making a commitment, there are several documents that should be reviewed, and important questions to ask.
Both of these documents contain rules and regulations that unit owners are required to follow and non-compliance can result in fines or other penalties. These documents also typically outline any rental policies that the building has, pet policies, and other common condo rules.
This should include the approved budget for the current year (and next year if already approved by the board). The budget will detail all of the planned expenditures of the association including the operating expenses of running the building. The budget will also list the amount of money that is allocated to reserves, a good rule of thumb is that 10-15% of the funds collected should go to fund the reserves but this varies from building to building.
The Reserve Study
A reserve study is a budget planning tool that helps a condo association establish a funding plan for future anticipated expenses. The reserve study typically includes an engineering report that details the anticipated useful life and replacement costs of the general and limited common elements of the building. This tool outlines how much an association should have in its reserves each year to fund the anticipated expenses.
Board meeting minutes contain additional insight into the ongoing discussions of the board and any concerns raised by owners or residents.
Master Insurance Policy
The insurance policy for the building and association works in conjunction with a unit owner’s policy to provide full coverage. If you are obtaining financing for your purchase your lender will also request a copy of the insurance policy.
This document is specific to the unit you are purchasing and contains information such as the monthly condominium fee, status of the account, and any other fees that are assessed by the association.
- What is the delinquency percentage?
- How many units are investor owned?
- Are there any upcoming upgrades or projects planned in the building?
- Are there any special assessments planned for the next year? Have there been any in the last year?
Our Homes and Lakeshore team can answer any other questions you may have before buying a condo.