By: Gregg Shivers
If you are considering buying a deed restricted property (one that is in a condominium or homeowner’s association) you should do some investigation before you sign a contract. The seller has a legal right to access all the books and records of the association so they or the realtor can get these documents for you. If the association has a website, many of the documents are posted there as well.
Here are a few tips.
- Be sure to review the governing documents which contain restrictions on the use of your property. A few examples of restrictions that many associations have are pet restrictions, limits on improvements such as fences, patios and sheds and limitations on the number or age of occupants. If you have non-conforming pets or intend to add a deck or patio, these are important things to know.
- Get all the governing documents (including all amendments) which are officially recorded with the county clerk but also get the Rules and Regulations and all resolutions which are typically not recorded. The Rules and Regulations often have restrictions beyond the governing documents (which may or not be legally enforceable). They also regulate the use of the common property and often regulate the appearance of your unit whether it be paint colors, landscaping or other aesthetic qualities.
- Ask to see the latest audit of the association’s finances and the current budget to ensure that the Association is financially sound.
- Request to see the latest reserve study. A well-run association should have a reserve study done by an engineer approximately every five years. This will inform you as to the condition of the common property such as roofs, heating systems, etc. If there are insufficient reserve funds reflected in the audit to keep these amenities in good repair, you should anticipate added assessments down the road.
- Ask if there are any special assessments scheduled.
- Review the minutes of the Board of Trustees meetings. Board meetings are required to be open to the members and members are entitled to receive the minutes of those meetings. If there are no minutes, it tells you that you may not have a lawfully functioning association. If there are minutes, reviewing them will tell you a lot about the community and how it is run.
- Find out who the management company is and research them. Make sure they are a reputable, experienced company.
- Find out what the percentage of rentals are in the community and if the community is FHA qualified. If not, it will limit your ability to resell the unit.
For more information on this or any other issue concerning your community association, please contact one of our Community Associations attorneys. For breaking news or updates on new blog posts, follow us on Twitter at: @njcondolaw, on Facebook at: njcondolaw, and on LinkedIn at: Hill Wallack Community Association Attorneys.