The Due Diligence You Should Do Before Buying a Condo

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Q: I purchased my condo in July 2021. Since then the condo board has imposed a special assessment of $120 per month for the next 84 months to pay for “unsafe balcony” repairs. This was not disclosed at the time of my closing.

I have made two payments so far, and no work has started, nor any updates provided by the board. My attorney said there wasn’t enough money at stake for him to sue. In addition, a neighbor across the hall is paying a special levy “in case the roof needs fixing.” My seller assumed that $5,000 appraisal at my closing.

We currently have no board chair; [the previous one] resigned following threats made to him. And another board member also resigned. There are two buildings of 12 units each and the monthly HOA fee is $280.

Is it a mess or what? I would appreciate your opinion. Thanks.

A: We certainly can’t tell if it’s a mess or not. We don’t live there. But we can share our perspective on what might happen.

What we know from your question is that your association is making repairs to the building. On the positive side, it’s good that a council intends to maintain and keep its building in good condition. We saw with the Surfside condominium collapse what can happen if a property is not maintained. On the other hand, owners get grumpy about ongoing special appraisals that never end.

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Before buying the house, you knew that the building was repairing the roof. We know you knew that because the seller put in the money to cover their share of the cost. So why was the special assessment for balcony repairs not presented? The question for you is whether you should have known or discovered the balcony repairs when you did your due diligence.

We cannot know for certain what the particular facts of your situation are. It is possible that the association had been talking for some time about the renovation of the balcony. But it’s also possible that balcony repairs moved to the top of the list as other items were completed.

In the previous columns, we mentioned that buyers wishing to acquire a condominium unit should do several things before committing to the purchase. An important thing to do is to have your home inspector examine the common elements of the building: the roof, exterior walls, common plumbing, heating and air conditioning units, hallways and stairways, basements and others.

Many inspectors may only inspect the individual unit, but many others will look at other parts of smaller association buildings to give the buyer an idea of ​​the condition of the building.

In this sense, a buyer must consider the minutes of the association, budgets and financial statements. Minutes can indicate what the building board is discussing regarding repairs or issues with the building. The budget will show where the association is spending money. And the financial statements will show how much money the building has on hand for future repairs.

Small building HOAs tend to operate informally and you may not have council minutes. But you should know where they spend money and how much money they have in reserve. Sam has seen smaller buildings where the building has no reserves and the owners pool money whenever they need to make a repair or need to spend money.

If you don’t have reserves or if the building collects money as all the repairs are done, you should expect to pay more than the usual monthly assessments from the first day after you join this association.

In your situation, you expect to pay around $10,000 for balcony repairs. We would like to know if you had the unit inspected and if the inspector noted any issues with the balcony. We would also like to know if there were any board minutes discussing the issues with the balconies. Finally, we would like to know if the state your condo is in has any seller disclosure requirements that would require the seller to tell you about the balcony issue – if the seller knew about the issue.

Sam has many clients who never participate or care about running their condominiums. They simply live in their units and leave the management of the building to others. It would be difficult to prosecute this seller if he was not aware of a problem with his building. Others are intimately involved with their buildings and notify buyers of any issues with their buildings.

Should your seller have informed you of this problem? Does it reach the threshold of a seller disclosure case? To find out, you may need to talk to another lawyer about your situation. Some state seller disclosure laws allow you to sue the seller for non-disclosure and would allow you to recover any attorney’s fees you incur if you win. That would be something to discuss with a lawyer on this matter.

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Finally, living and managing a small self-managed condominium syndicate can be a thankless job. Unit owners don’t like having to pay for repairs. The volunteer landlords who manage the building’s affairs bear the brunt of unit owners’ wrath when assessments rise or a special assessment is imposed.

Unfortunately, buildings need upkeep, repairs, upkeep, upgrades, and redecoration, among other things, and that costs money. You may be living in a building that needs major repairs, and the council’s volunteer officers believe it’s best not to deal with the many angry unit owners. But that just leaves the building in worse shape. We hope unit owners can come together and figure out what needs to be done and how fast and moves to do it as best they can.

Furthermore, if the association does not have enough money on hand to carry out repairs, it will have to collect money; and once it has sufficient funds, the association can hire a contractor to take care of the balconies. As you can imagine, the contractor won’t want to do the work and wait six years to get paid. If the building got a loan from a bank to pay for the repairs, we suspect that they will borrow that money, undertake the repairs and then use the money from the special assessments to pay off the loan. Again, this takes time.

We suggest that you attend board meetings and familiarize yourself with the people who manage the building. See if you can help them. Consider introducing yourself to the board. It may take some time, but it will definitely help you understand where your property is, and the pros and cons of owning a unit in a small condominium.

Ilyce Glink is the author of “100 questions every first-time home buyer should ask(Fourth Edition). She is also the Managing Director of Best Money Moves, an app employers provide to employees to measure and reduce financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them via the website, BestMoneyMoves.com.

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