Q: Before purchasing the unit, I rented another apartment in the condo for a month and tried to meet as many people as possible, including the staff, and learn as much as I could. Shortly after we purchased the unit, the building passed a special assessment to increase its reserves. I received a letter regarding another assessment due to an increase in my annual fee. When we inquired about these increases, we learned that the building needed repairs and was in a dispute with the developer over construction defects. It seems like no one we spoke to previously knew about these issues.Should I have done something else before purchasing? — Ron
answer: Unexpected expenses are common for property owners. Sometimes, unexpected repairs arise, such as a new dishwasher or air conditioner. It could also be a new roof. This is where reserves come into play. Owners of single-family homes need to save money for things like a new roof, while those who live in apartment complexes rely on associations to set aside a portion of their dues. All community association members should expect regular dues to continue to increase and special assessments to occur from time to time.
Many, if not most, associations do not have sufficient reserves due to recent events, keeping dues low until developers leave, or simply poor planning. Is not … In some cases, this shortfall can be made up by increasing membership fees. You may also need one or more special assessments to catch up. The good news is that once repairs are completed or reserves are fully funded, rates will stop increasing and may even drop slightly.
While small price increases are inevitable, large price increases are often filtered out during the purchasing process. Getting to know the building and talking to staff and neighbors is a great idea, but it’s not enough.
If purchasing through a neighborhood association, buyers should review the community’s financial situation, including its budget and reserves, to ensure that the community’s finances are sound. You should also review board meeting minutes for at least the past year to ensure that no issues or special evaluations were discussed. It is a good idea to check court records available on the internet to determine if your community is involved in expensive litigation. Finally, for a small fee, the purchaser can purchase an “estoppel” report that discloses important information about the association and its financial condition.
Gary Singer, a certified real estate attorney, writes about industry legal issues and the housing market. To ask him a question, email gary@garysingerlaw.com or visit SunSentinel.com/askpro.