Top 10 Questions to Ask When Buying a Condominium
How is the condo owner’s association (COA) organized and run?
You’ll want to know if the COA runs itself, or if there is a third party management company tending to the day to day operations. If there is, you’ll want to know the nature of their reputation and experience.
How decisions are made relative to capital expenditures, budget approval and policy changes. This should be crystal clear in the COA documents.
Who’s on the board of directors and how elections work.
What are the rules of the COA?
Can we have pets?
Can I rent my unit?
When can I access the amenities?
Are there certain times my balcony is off limits?
How does the budget look?
The budget will give you a familiarity with the association you couldn’t get otherwise. It’ll tell you how much the COA has in reserves, how they are planning on spending the reserves and where your monthly COA dues are going. The most important parts of that budget include the total amount of outstanding debt owed to the association and the percentage of owners who are not paying their dues.
Are there a lot of absentee owners?
This is an important consideration for the wear and tear of the building. If a building is only occupied half the year (say in a beach setting), and then sits mostly vacant for the other half of the year, it’s reasonable to expect the non-durable items to last that much longer, experience lower repair and maintenance expense and less custodial expense as well.
At the same time, less occupancy means less eyes and ears on the property, so there should be some good security measures built in. Also, if everyone is typically showing up at the same time, the building needs to be designed and built to operate well at peak load. This means that there needs to be ample parking, waste removal operations dialed in, elevator’s running at peak performance and any systems impacting the entire building (boilers and chillers) are good to go. Checking to ensure there are up to date service and maintenance contracts in place servicing these critical systems is a good idea.
Is the building properly insured?
It’s never a bad idea to get a second opinion. Even if the COA has insurance on the building, it’s advisable to take copy of the policy and have your own trusted insurance agent take a look to confirm or deny there is enough coverage.
What are the biggest complaints?
What are residents complaining about at the COA meetings? You may want to locate the minutes from the last couple of meetings, or talk to current owners. If the association isn’t quick about fixes, you’ll want to understand why.
Is there storage space available?
Some condos offer residents storage space or an extra room to facilitate some storage. Your condo will likely not have an attic or garage (unless you’re in a townhouse), so ask if you’ll be provided any extra space to store the stuff you’ll be needing.
How does parking work?
Parking can make or break a project. You’ll definitely want to know how many parking spaces you have, are they numbered and assigned, where guests park, how the parking procedures are enforced.
Do I fully understand the monthly association fees?
Condo association fees are calculated based on how many units there are, what it costs to maintain the property (both short and long-term), whether or not the community is professionally or self-managed, and funds set aside for litigation and major repairs.
Get your hands on a breakdown of the monthly dues you’ll be responsible for. Make sure you can truly afford this extra payment, and that you understand what you’re getting for this payment. And remember, condo association fees are not tax-deductible like your mortgage is.
You also need to look closely at the Repair and Maintenance Fund. Every condo association must put a certain portion of dues aside for major repairs. If the complex is less than 10 years old, the repair fund should have 10% of the cost to repair major items (i.e. roofs, tennis courts, etc.). If your community is 10-20 years old, the Fund should have 25%-30% or more on hand for major repairs. And if the community is more than 20 years old, 50% needs to be funded.
Many communities promise their residents “ultra low dues.” Be wary. Although this may seem appealing, chances are it means the community isn’t funding their Repair Fund like they should; if the roofs end up needing a replacement, you and all the residents could be hit hard with a major bill.
Find out the delinquency rates on monthly dues as well. When other owners fail to pay their monthly dues, this often leaves everyone else holding the bag. Good communities will have a delinquency rate of 15% or less.
Who owns what?
Just because there is a balcony attached to your unit, that doesn’t necessarily mean it’s yours. You’ll want to consult your COA documents which should show you via an architectural drawing who owns what exactly. For instance, it’s pretty common to have balconies owned (and maintained) by the COA. This would make them a “limited common element” which means that it’s commonly owned, but limited and exclusive to a designated unit. You’ll want to understand which amenities are truly commonly owned and which are limited as it may impact your access to certain areas.