What should I know before buying a condo or townhome?

Purchasing a condo or townhouse typically means ownership in what is known as a common interest development (“CID”). When a buyer purchases a unit in a CID, the buyer is either purchasing a pro-rata (fancy word for proportionate) share of the common areas of a complex or the buyer has an interest in a homeowner’s association that owns the common area.
In either scenario, this usually means that the buyer will be required to make monthly payments, also known as regular assessments or homeowner’s association dues, to pay for maintenance of the common areas. But what happens if a complex or community suddenly needs to replace a damaged roof from an unexpected storm or update an aging fitness center? These types of unexpected expenses may call for special assessments. Special assessments are funds in addition to regular assessments that an association finds is necessary to address special or unexpected repairs or additions for a complex.
CID’s also may have special rules and regulations like architectural requirements, limitations on pets, and age restrictions (ie. senior housing).

What does buying a condo or townhome mean?

Part of the appeal of buying a condo or townhome is the ease of maintenance for upkeep of the home. The fact that an association maintains and cares for landscaping and exterior features means less hassle and worry for an owner. However, this convenience also means that an owner must follow certain rules, and violation of rules can lead to violation notices or possible fines from an association. As you can imagine, failure or improper disclosure of important information related to a homeowners association can lead to conflicts, and potentially litigation, between a seller and buyer. Thus it is important that a seller fully disclose all necessary documents related to ownership in a CID. In addition to regular disclosures that are legally required in residential transactions, California resale of a unit in a CID requires additional disclosures including:

1.  Copies of all governing documents of the development:
2. A statement describing restrictions in governing documents limiting the occupancy, residency, or use on the basis of age;
3. A copy of the most recently distributed annual budget report;
4. A statement from the association regarding the associations current regular and special assessments and fees as well as any assessments or fees specific to a unit that has not been paid;
5. A statement of any notice previously sent to a seller related to any alleged violations of rules that have yet to be resolved;
6. Whether there is any current litigation between the builder of the complex and a homeowner’s association with a copy of any alleged defects;
7. Any settlement agreement between a builder of a complex and the homeowner’s association including a description of any defects the association believes to be present and when such defects will be replaced;
8. Any change in a homeowner’s associations current regular and special assessments and fees which have been approved that have yet to become due and payable;
9. Any provisions in governing documents that prohibit the rental or leasing of units including a description of the restriction and how it applies;
10. A copy of homeowner’s association board minutes conducted over the past 12 months if requested by a prospective buyer.

There are many benefits to owning a condo or townhome including ease of ownership, uniformity in design, and affordability. Some find a sense of comfort in knowing that they can rely and count on a group of other people to share in what may be increased costs due to unexpected events. However, this comfort also calls for increased diligence when either selling or purchasing a unit.