Considering a Condo Purchase?

Considering a Condo Purchase?

Even during COVID times, news reports tell us that individuals and families continue to buy and sell homes and move to new residences. There are good reasons for this. Some need more space or a different location to work at home. Some want a more walkable community, to access services and entertainment without public transportation or use of a car. Those living alone might want to be less isolated, in a location where they can easily interact with others. Some may feel that, with a calendar freed up from previously scheduled travel, they might as well use this time to downsize and find a place to “age in place.” Those struggling financially might want to access the equity in their home and relocate to less expensive housing. Those with extra cash on hand might want to transition from being renters to owners and start building equity in property they own.

One option is to purchase a condo. To evaluate whether or not this is right for you, become familiar with the vocabulary of condominium ownership and the pros and cons of living in and/or owning a condominium unit. This blog post is intended to help you understand condominiums. It is based on my own 28 years of owning and living in condominiums, several years of legal work for condominium owners and homeowner associations, and the input of more than 30 personal friends and Facebook acquaintances. I love my condominium unit and am proud of the good work done by our Association Board. Despite the occasional challenges, most condominium residents are happy with their homes, but this lifestyle is not for everyone, so being well informed in advance will help ensure a successful transition to life as a condominium resident and member of a condominium Homeowners’ Association.

The term “condominium” refers to a type of real estate ownership in which individuals own units, which might be referred to as apartments or townhouses, and all the owners together jointly own common and limited common areas. A condominium complex can be as small as two units, a duplex, or be comprised of multiple buildings and hundreds of units. The building or buildings might look like a multi-story apartment building, row houses, individual houses or some combination of those. The documents establishing the condominium will define the boundaries of each unit, which usually extend to the paint or other finished surfaces on the inside of the unit’s exterior walls.

Upon purchase, unit owners are automatically enrolled in the development’s Homeowners Association (HOA). This includes a requirement to pay a monthly assessment, representing the unit owner’s share of common expenses. Becoming a unit owner also obligates each unit owner to abide by the rules of the HOA and the covenants contained in the Condominium Declaration, the document the developer filed with the county to create the condominium.

You will find additional definitions in the glossary at the end of this article.

PROS AND CONS OF CONDOMINIUM OWNERSHIP

1. Location.

PRO: Condominium buildings are often located in areas with views, near shopping areas, parks or golf courses, and close to public transportation. For many people, location is the most important factor in selecting a particular condominium.

CON: Popular central locations often have excessive noise, traffic congestion and possible air pollution. On a golf course, your home may be hit by balls and it may be unsafe to sit outside. (Note: my first condominium home was on a golf course!)

2. Maintenance.

PRO: Many people prefer not to do yard and home maintenance, and it can be expensive and inconvenient to hire contractors. You can avoid tasks such as cleaning gutters, mowing the lawn, maintaining trees and shrubs, exterminating pests, and cleaning exterior windows, not to mention maintenance of the exterior paint, roof, chimney, swimming pool, or hot tub, by moving to a condominium and letting the Homeowners’ Association (HOA) have that responsibility. Be sure you select a condominium project large enough to hire professional management for grounds and building maintenance. Look around the property and talk with residents to determine if the level of care meets your standards.

CON: You will want to evaluate the HOA budget and minutes of HOA board meetings and annual meetings to learn what maintenance problems might exist. You will be responsible for your percentage share of the common expenses and fully responsible for maintenance of the interior of your unit. You will need to deal with your own clogged toilet, leaky faucet and paint, as well as damaged or broken windows (in most developments). If your water leak damages another unit, you (or your insurance) are likely to be responsible for the repair cost. In smaller condominium developments (50 units or less) some exterior maintenance tasks may be assigned to owners. It would be good to find out in advance what those tasks might be. (Note: a friend told me that owners in her complex share trash duty – pushing a large dumpster onto the driveway on trash day.)

3. Cost.

PRO: Condominium units are available in all price ranges. In most cases they are less expensive than a single-family home of a similar size, especially when location and amenities are taken into account. In some developments, most units are of a similar price, while other buildings have a large price range. You can decide which you prefer: neighbors likely to be of a similar economic status or the variety that can come from having units of substantially different prices. A person who enjoys a high level of maintenance and amenities at a good price might seek out a small, less expensive unit in a development which also has more costly units. The owners of the high-priced units will probably be paying most of the HOA expenses (through higher monthly assessments) and are also likely to expect a high level of maintenance, which all residents will benefit from.

CON: You will be required to pay monthly assessments to the HOA and the amount is likely to increase each year. You are required to pay these assessments even if you do not use some of the amenities, travel a lot, or are rarely home. Occasionally, there will be special assessments for major projects that have not been adequately funded. These could be very substantial. If you default in payment, the HOA can collect through foreclosure on your unit. Some owners may not have the resources to pay a large special assessment, creating legal and financial challenges for the HOA.

4. Amenities.

PRO: Your development might have a swimming pool, hot tub, boat dock, exercise room, party room, rooftop garden, or large patio and barbecue. You won’t be responsible for the maintenance, except through payment of monthly assessments and compliance with HOA rules. If there is a particular amenity that is very important to you, you are likely to find a condominium that offers it. Some buildings even have on-site management and a concierge to handle package deliveries.

CON: You will not want to pay for amenities you are unlikely to use or which may generate conflicts among owners regarding their cost or the rules regarding use. Some amenities might also increase noise problems. If you or your guests will not make use of a swimming pool, you probably don’t want to pay for its upkeep.

5. People.

PRO: Some condominium residents find lifelong friends among other residents and socialize with them regularly. The HOA offers opportunities to get to know other residents by serving on the board, committees or a task force. If the building has hallways, a common garage or poor soundproofing, you will definitely have opportunities to meet your neighbors. For those wanting more solitude, choosing a duplex or townhouse development, with separate garages, could allow for more isolation. You can even avoid HOA meetings by signing a proxy designating someone else to vote for you.

CON: Don’t expect the HOA to have scheduled events, other than the Annual Homeowners’ Association business meeting, which is required by law. If you would like to be in a building which has holiday parties, book groups, and guest speakers, you may need to plan and manage those activities yourself. The HOA does not exist to plan social events and there may be few residents who want to take on that task.

6. Security.

PRO: Some people gain a sense of security from living in a condominium, since there are other people living nearby and possibly fewer opportunities for intruders to gain access to your home. It will also be easier to leave on vacation when you don’t need to be concerned about the security of your home.

CON: You will not always know new residents and guests who enter the property. If you serve on the HOA board, it may seem like there are a lot of security issues, such as thefts from cars in the garage, but on a “per resident” basis, the problems are likely to be small. The property manager will not have keys to individual units, so you may want to designate someone to keep a spare key for emergency access, the same as you might do if you lived in a single family home.

7. Aesthetics.

PRO & CON: Do you enjoy flowers and well-groomed planting areas? Do you like colorful hallways with artwork and other amenities? In a condominium, all owners share the expense of these items. This is either a plus or a minus depending on how much you value aesthetics compared to your neighbors.

8. Accessibility.

PRO: Not everyone needs to live in a building with no stairs or an elevator, but all of us are likely at some time in our lives to benefit from a barrier-free residence. Sometimes that need arises as we get older or have an injury and sometimes the need is to accommodate guests who come to our home. Pick the condominium which has the level of accessibility you need now or may need in the future.

CON: If the building you are considering has an elevator, consider what will happen if the power goes out or the elevator has a mechanical failure. Those with a permanent disability might want a building with more than one elevator and a back-up power supply for the elevator. Alternatively, those with a special need may choose a ground floor unit.

9. Volunteering.

PRO: Living in a condominium will provide many volunteer opportunities. You may gain new skills in financial management, negotiating contracts, and landscape maintenance.

CON: The success of any HOA is dependent upon the skills and good will of its residents and owners. Board members are volunteers and special projects, such as upgrading the landscaping, installing a fence, or painting the building, require the participation of volunteers to approve the design, select a contractor and supervise the project. The HOA, through its Board of Directors, adopts rules that residents are expected to follow. Residents must depend on the good faith of the board to adopt and enforce reasonable rules. The HOA needs a core group of owners who are willing to take leadership positions. Other owners and residents need to stay informed about the rules and procedures and cooperate in creating a successful residential environment. It can be difficult to know in advance how well the condominium board and management function.

10. Communication.

PRO: A well-run condominium will use multiple methods of communication to stay in touch with owners. There may be a website, a newsletter, meeting minutes, a management office, and an emergency phone number. If someone other than the owner occupies the unit, the owner is responsible for making sure there is good communication with the resident, whether a tenant or family member.

CON: As an owner, you are expected to read materials provided to you and comply with condo rules and procedures. Before completing your purchase, you should read the Declaration which created the condominium, the bylaws and rules of the HOA, the current budget, the reserve study, and the minutes of recent meetings of the board and the owners. A few areas that may generate conflicts are regulation of pets, noise and rentals.

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The law governing condominiums varies from state to state and state laws have changed over the years, so the law may apply differently depending upon the year each condominium was created. The Washington State Condominium Act is found at: RCW 64.34. Anyone thinking about purchasing a condominium should consider reading through the Act to become familiar with how condominiums operate.

The Community Associations Institute is a national non-profit organization that offers publications and events addressing the needs of those living in or working with condominiums and other HOAs. The Washington State Chapter of CAI (WSCAI) was founded in 1977. It has both a website and a Facebook page. I was the founder and first president of the Washington State Chapter of the Community Associations Institute.

Carolyn Hayek

Blogger and happy condominium resident, residing in beautiful downtown Kirkland, WA.

Glossary

Annual Meeting: A meeting of all the condominium unit owners held once a year to hear reports from the condominium Board of Directors, to elect new board members, and to vote on essential business of the Homeowners’ Association. Owners unable to attend in person can sign a proxy transferring their vote to another person for the purposes of the meeting.

Assessment: The monthly fee paid by a unit owner to the Homeowners’ Association to cover the unit owner’s percentage responsibility for the annual budget. The amount of the assessment is determined by the Board of Directors when the annual budget is adopted. The percentage of the budget assigned to each owner is listed in the document establishing the condominium, the Condominium Declaration. A Special Assessment is a supplemental payment required due to inadequate funds being available for a special project, such as for a roof replacement or renovation of decks. Monthly assessments are likely to increase each year with normal increases in expenses. Special assessments should be infrequent. Most boards anticipate major expenses and build up a reserve fund so that large special assessments can be avoided. Some people refer to the monthly assessments as “dues” but that is not the correct term. Payment of assessments is a legal responsibility of each owner and delinquent assessments can be collected through legal action and foreclosure against the individual unit.

Board of Directors: A small group of people elected by the homeowners to make day-to-day decisions regarding the maintenance and operation of the condominium complex. The board usually consists of 5-7 homeowners, elected for terms of 2 or 3 years. Its structure and procedures will be set out in the Condominium Declaration, the Homeowners’ Association Articles of Incorporation and the Bylaws of the Homeowners’ Association. The Board will decide which tasks to handle themselves and which to assign to a management company, grounds maintenance business, on-site employee, or other contractors.

Bylaws and Rules: The legal framework for the operation of the Homeowners’ Association and requirements for the conduct of unit owners. The condominium Board of Directors operates pursuant to state law and the requirements of the Condominium Declaration which was filed with the county when the condominium was first created. The Declaration may have been amended one or more times. The Bylaws set forth how the Homeowners’ Association will operate, the process for electing board members and the responsibilities of the board. Rules are adopted by the board so that owners understand their responsibilities. The rules may include such things as quiet hours, restrictions on pets, approval procedures for remodeling inside a unit, limitations on items that may be placed on a patio or deck, requirements regarding window coverings that can be seen from outside the building, etc. The rules will also include penalties for violations.

Common Areas: The portion of a condominium project owned jointly by all owners and managed by the Board of Directors. A portion of the Common Areas may be designated a

Limited Common Area. Limited common areas include patios and decks which are for the use of a particular unit, not all owners. Owners with ground floor units will want clarification of what the boundary of their Limited Common Area is, so that they don’t assume control over a larger area than that legally assigned to them. The Limited Common Areas are defined in the Condominium Declaration. Parking and storage areas are likely to be Limited Common Areas. Changes will require an amendment to the Condominium Declaration which is very difficult and sometimes not possible.

Condominium: A type of real estate ownership in which individuals own units, which might be referred to as apartments or townhouses, and all the owners together jointly own common and limited common areas. The documents establishing the condominium will define the boundaries of each unit, which usually extend to the paint or other finished surfaces on the inside of the unit’s exterior walls. While not discussed in this article, a condominium may also include commercial units or might not have any residences, such as a warehouse or marina condominium. In common usage, sometimes the term “condominium” is used to refer to the entire condominium complex, and sometimes the term is used to refer to an individual condominium unit.

Declaration: The legal document filed with the county by the developer to create a condominium. The requirements are set forth by the laws of the state where the development is located. The Washington State Condominium Act is found at: RCW 64.34. Some people refer to the Declaration as the CC&Rs or “Covenants, Conditions and Restrictions” but those are not the terms used in the Condominium Act.

Homeowners Association: An organization comprised of all unit owners of a condominium. For Washington State properties, RCW 64.34.300 requires the creation of a “unit owners' association” upon the sale of the very first unit in the development. The “unit owners’ association” is commonly called the Homeowners’ Association or HOA. (Since it’s possible that a condominium unit might be an office or other commercial space, “unit owner” is a more inclusive term than “homeowner.”) The HOA generally meets once a year to elect board members and to discuss business that the Board of Directors may place on the meeting agenda. The Board of Directors will usually meet monthly.

Maintenance: Responsibilities split between unit owners and the HOA by law and the condominium documents. Unit owners are responsible for the maintenance of the interior of their units. If a toilet is stopped up, a light fixture stops working, or an appliance malfunctions, the homeowner is responsible for fixing the problem, usually with no assistance from the Homeowners’ Association. In addition, the homeowner is responsible for any damage the malfunction may have caused to another unit or the common area, such as a water leak from a hot water heater that sends water through the floor to another unit. If the origin of the problem comes from outside the unit, such as a roof leak, the HOA will likely be responsible, but the unit owner may have to share in the repair cost, depending on the provisions of the condominium documents. The condominium Board of Directors is responsible for the maintenance of the common areas, usually handled by a property management company or a maintenance contractor. The cost of maintaining the common areas is shared by all owners through payment of monthly assessments. In an individual owner or guest damages a common area, they may be responsible for the repair cost.

Management Company: A business which contracts with a condominium board to take responsibility for designated management functions, such as collecting monthly assessments, handling routine building and grounds maintenance, drafting a budget, paying bills, recommending reserve amounts, handling communications with homeowners, dealing with emergencies, and processing insurance transactions. Some condominium boards elect to manage these functions without a property manager. It is common for the board to change management companies from time to time and staff members at the management company are also likely to change over time. Each condominium development will determine its own way to handle these matters, so the procedures will be different from one development to another.

Minutes: The record kept of the decisions made at board meetings and Homeowners’ Association meetings. These documents should be available for review by all unit owners. At the time of purchase, a new owner is entitled to a copy of numerous documents pertaining to the condominium building and its operation. They are contained in a Resale Certificate. RCW 64.34.425 lists the items required by Washington State law to be included.

Reserve Study: A report developed by an outside consultant to estimate the useful life of various elements of a condominium project for the purpose of determining what funds should be set aside in a reserve account in order to be prepared for periodic large expenses, without the need for large special assessments. It is recommended that the Reserve Study be updated each year. Anyone purchasing a condominium unit will want to review the reserve study and determine whether adequate funds are available for upcoming maintenance and capital projects.