A condominium is a unique form of communal property ownership created under the Massachusetts Condominium Act. When someone purchases a condominium unit, he or she acquires exclusive ownership of the condominium unit and shared ownership with the other unit owners in the “common areas and facilities” of the condominium. The common areas typically includes roofs, foundations, hallways, stairs, boiler rooms, storage, and parking lots.
In order to manage the maintenance and repair of the shared common area space, each condominium establishes their own condominium association, also known as a unit-owners’ association. The association is run by trustees elected by unit owners who make communal decisions in the best interest of the community. The trustees set the operating budget, monthly condominium fees, and determine if any special assessments are required.
TIPS FOR PURCHASING A CONDOMINIUM
To borrow from a famous phrase, not all condominiums are created equally. Some condominiums are very well run; some are quite poorly run and underfunded. Buyers interested in purchasing a condominium unit must do their homework not only on their individual units but on the financial health and governance of the condominium as a whole.
Some questions buyers should ask of the condominium association include:
- How much money is in the capital reserve account and how much is funded annually? The capital reserve fund is like an insurance policy for the inevitable capital repairs every building requires. As a general rule, the fund should contain at least 10% of the annual revenue budget, and in the case of older projects, even more. If the capital reserve account is poorly funded, there is a higher risk of a special assessment.
- Is there a professional management company or is the association self-run? A professional management company, while an added cost, can add great value to a condominium with well run governance and management of common areas.
- Is the condominium involved in any pending legal actions? Are there any disputes between owners, with developers or with the association?
- How many units are owner occupied? A large percentage of renters can create unwanted noise and neighbor issues. It can also raise re-sale and refinancing issues with Fannie Mae and FHA condominium regulations.
The attorneys at Canner Law & Associates, P.C. are well equipped assist you with this “due diligence.” As part of our standard condominium representation, we will review the following condominium documents and issues in connection with the purchase and sale agreement:
- Master Deed and amendments
- Declaration of Trust/By-Laws
- Unit Deed and Floor Plans
- Condominium Budget and Capital Reserve Fund
- Fannie Mae/FHA Compliance Provisions
- Condominium Annual and Special Meeting Minutes
- Pending or Contemplated Special Assessments or Litigation
We will also build in provisions into the purchase and sale agreement to protect you in case there are unanticipated issues with the condominium.