what you need to know when buying a condominium

Buying a Condominium? Here’s what you need to know.

  • Posted by Courtney Dean in Real Estate
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If you are considering purchasing a condominium, whether it’s a new one or a resale, you need to carefully review these important documents before making your decision:

Buying a Condo

When buying a condo, there are additional condo docs you need to review and take into consideration above what is generally looked at when purchasing a single family home for sale.

Shared Ownership

Condominiums, by design, have some level of shared ownership.  In most condos, the condo association will be responsible for maintenance and upkeep of those shared areas.  The shared parts of a condo can include:

  • The parking lot
  • The actual buildings – from the sheetrock out.
  • Swimming Pool
  • Gym
  • Other Common Areas

In addition, the condo association is responsible for the insurance on the shared areas.  Since the association will take in money from all condo owners, they decide where and how that money gets spent on behalf of all of the owners.

This makes reviewing the condo docs extremely important – to insure the money is being spent appropriately.

The Condominium Instruments.

The Instruments include the Declaration, the Bylaws, the Plats and Plans, as well as the Rules and Regulations and, if your Condominium Association is incorporated, you’ll also need to obtain their Articles of Incorporation. This set of documents should clearly state the operating procedures by which the Condominium functions.

The most important of these aspects deals with “use restrictions.” As an example, the use restrictions will spell out whether you can you rent or sublet your unit, and if you can for how long? Can you have pets? Are the amenities of the condominium, such as a tennis court or a shared pool, included in your condominium fee, or will they cost extra?

The Bylaws will also tell you if there are architectural control requirements which have to be met, as an example, if you want to make external changes to your unit. Many community associations have architectural controls that will be outlined in the Association documents. These controls must be followed by all unit owners.

Condo Buying 101

A statement of the monthly condominium fee allocated to your unit.

At the end of the Condominium Declaration, there should be an Exhibit listing the percentage interest for every unit in the building. The simplest way to determine your monthly fee is to multiply your percentage interest times the total budget that should be your annual fee. Now divide that number by 12 and you’ll have your monthly payment.

As an example, if the annual budget is $100,000, and you have 5% interest in your Association, your annual fee will be $5,000, and your monthly fee $416.66. You also need to know if the utility charges are included in your monthly fee. Often, buyers are caught off guard thinking that their monthly condo fee also includes heat, electricity and gas, and then feel taken advantage of when they find out otherwise.

If you are purchasing from a seller, you’ll want to know if they are current with their condominium fees, as outstanding fees are generally a lien on the property and will pass to the new condo owner. In most cases, your title attorney will make sure that these outstanding obligations are paid off at settlement, but it’s always a good practice to check on it yourself. It’s also important to note that if you are closing on your condominium in the middle of the month, you will have to prorate the monthly condominium fee between the buyer and seller.

The current budget.

This document is very important, and should be reviewed very carefully. If you don’t have a head for accounting, find someone knowledgeable to assist you.

The current budget document will list the actual yearly budget line by line, and show the budget as a month to month breakdown. As an example, if the Association is budgeting $15,000 per year for the water bill, and by the end of March they have spent $10,000, something is definitely wrong, and the budget planners obviously made a mistake. Keep in mind that these planners are unit owners just like you and, although they are often guided by professionals, mistakes can, and do, happen.

The budget — or it may be the annual auditor’s report — should include the amount of dollars that the it has in reserves. If the Association has not made any capital expenditures or improvements in a number of years and the reserves are low, you might want to consider finding another condominium to buy. When reviewing this document make sure that you are looking at the current status of reserves; do not rely on old accounting reports. Typically lenders such as FHA require a reserve of at least 10 percent of the annual budget.

The proposed budget.

Each year, the condominium association, usually through its management company, will assist the Board of Directors to prepare the proposed budget for the coming year. These proposed budget figures are what is used to determine your condominium fees for the next year. Again, this should be carefully and methodically reviewed.

buying a condoThere is no formula that can guarantee that your condominium fees will stay the same. Just as if you were buying a single family house, your real estate taxes, utility bills, and other maintenance costs will most likely fluctuate on a year to year basis. The same is true in a community association. You do have the option to talk to the seller to try to to get a guarantee of the level of condominium fees for a period of years, but of course this requires negotiation between buyer and seller. If the seller agrees, it must be made part of your purchase contract.

You will also want to ensure that there are no special assessments pending against the unit and, if there are, the payment of the outstanding assessments should be negotiated between the parties. In some instances the seller might be willing to assist you by paying all, or even a portion, of any such special assessment. The resale certificate should disclose any outstanding assessments and should also disclose the existence of any pending lawsuits.

In addition to reviewing the various documents mentioned above, it is strongly recommended that you contact the property (site) manager to discuss the condition of the building. It is also recommended that you visit the complex on a Saturday or Sunday, talk to other people living there and discuss any concerns they may have as unit owners.

Buying a condominium is not for everyone but, if you do decided that this is the direction you want to go, you need to do your homework before signing a contract.

Most states have laws that give you the right to terminate your sales contract within a set period of time based on your review of the resale package but it is often only three to five days. Your responsibility is to obtain the package, review the documents carefully, and then make your decision based on all of these factors.


For most people, a real estate purchase is the largest investment of their lifetime.  Choosing the right condo complex is a big decision.  Whether you are buying a condo to rent out as a vacation rental investment or moving in as your personal residence, its important to make sure that you are making a sound investment.  Reviewing the condo docs for your association is a critical step.

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