Top 10 Tips When Purchasing a Condominium in Michigan

Condominium living has become very popular in Michigan in recent years. However, there are many features of condo ownership to consider before purchasing a condominium. Owning a condo is very different from owning and living in a typical residential house and a prospective purchaser should understand the basic ownership differences. If you are considering buying a condominium, keep in mind the following Top 10 Tips.

1. Find Out the Total Number of Units as Well as the Percentage of Rented Units in the Association Before Purchasing a Condominium

It is important for a prospective purchaser to understand that owners of condo units share the association’s expenses for regular repairs and maintenance of the common areas of the complex. This is usually reflected in a monthly assessment fee that all unit owners pay to the association. Sometimes special assessments are needed for an association to pay for major repairs and projects that are not covered by the monthly dues. Smaller associations will have fewer owners of condo units to share the costs for general repairs and maintenance as well as for special assessments.

An owner’s expenses will also depend on the size and condition of the association’s common areas and amount of maintenance and repairs that are needed. It’s also important to keep in mind that it may be more difficult to obtain financing for a condominium purchase in an association with a high percentage of units that are rented and non-owner occupied.

2. Confirm Whether Any Utilities Are Included in the Monthly Assessment

Many condo associations include some of the utilities in the monthly assessment which is offered as an additional benefit. However, remember that all the owners in a condo association share the cost for those utilities included. Sometimes it may be better to pay your own utilities directly than to equally share the cost for everyone's heating or air conditioning.

3. Ask if There is Any Pending Litigation Involving the Condominium Association or the Developer

Pending litigation such as foreclosure actions claims by condo owners could indicate issues with the association’s management or a potential for substantial costs for the association.

4. Determine How the Condominium Association is Managed

Usually, larger condominium associations are managed by management companies whose costs are a big part of the association’s expenses. In addition, a condo association’s board of directors will sometimes give the management company extensive authority over the day-to-day operations of the condominium association. Before purchasing a condominium, it is important to understand how the association is managed and the type of management company you will be dealing with as a co-owner.

5. Ask if There Are Pending Special Assessments Prior to Purchasing a Condominium

Before purchasing a condominium, ask if there have been any special assessments or increases in the monthly dues over the past five years or if there are any assessments currently under consideration. It is not uncommon for a condominium association to have special assessments for unexpected expenses due to major repairs and projects. However, multiple special assessments or increases of the monthly dues over a relatively short period of time can indicate that there is a problem with the condominium association’s finances or management.

6. Have Your Inspector Look at the Condition of the Common Areas in the Condo Complex

A prospective purchaser is certainly interested in a unit’s condition and determining what repairs and maintenance will be his or her responsibility. Do not forget to consider the general condition of the association’s common areas and buildings of the condo complex that are the association’s responsibility. As a co-owner, you will be paying for repairs and maintenance for your own unit as well as for repairs and maintenance of the common areas and buildings in the complex.

7. Ask Your Potential Neighbors if They Are Satisfied With Management

Before purchasing a condominium, take time to talk to a couple of your potential neighbors and ask whether they have any concerns or complaints about how the association is managed. You should also talk to a member of the association’s Board of Directors and ask whether they are facing any important issues in the near future that may lead to unexpected expenses. You may also review the minutes from the last couple of Board meetings as well as the minutes from the association’s annual meeting. Note that many condominium associations have their own websites where they post important information and documents which you can access.

8. Review the Seller’s Disclosure Statement

The Michigan Seller Disclosure Act requires the seller of residential property to provide a Seller’s Disclosure Statement form to a prospective buyer before entering into a binding purchase agreement for the property. The disclosure form contains information relating to the seller’s understanding about the condition of the property and includes a comprehensive list of specific items that are covered, including: all fixtures and appliances; electrical systems and components; and plumbing, heating, and cooling systems and components. The disclosure form includes the condition of all structural aspects of the property and improvements, as well as specific information about water problems, insect infestations, legal issues, and environmental issues and hazards. Although this information is important to consider, a prospective buyer should never overlook obtaining a detailed inspection of the condo unit by a qualified and licensed home inspector.

9. Obtain an Understanding of the Financial Condition of the Condominium Association

Ask for the most recent financial reports of the association along with the minutes from the condo association meetings. Ask questions to determine whether there are monthly assessment increases or special assessments planned, the number of owners who are delinquent in their monthly dues and whether the association is involved in any lawsuits. Be sure to check the balance of the condominium association’s capital reserve account. If the condominium association does not maintain a sufficient capital reserve account there is the potential for recurring special assessments and increases in the monthly dues, depending on the condition of the common areas and buildings under the control of the association.

10. Include an Attorney Review of the Condominium Association’s Documents in Your Sales Contract

Most importantly, include a provision in your sales contract that your attorney is to review and approve the condominium association’s master deed, bylaws, minutes from the association’s most recent annual meeting, the association's current financial statements and its annual budget. These are crucial documents that you should review along with your attorney in order to have a full understanding about your ownership responsibilities and the restrictions for the condo unit you are considering.

Schedule a Free Consultation with a Respected Ann Arbor Real Estate Attorney

Buying a condo offers many advantages, but it also comes with many challenges. Prospective buyers must have a clear understanding not only of the sales contract for a condominium, but also of the association’s bylaws, financial statements, rules and restrictions. Consulting an experienced real estate attorney is essential to understanding and protecting your rights throughout the process of purchasing a condominium.

Ager Law Office helps individuals and families with all aspects of purchasing, selling and owning condominiums. From our Ann Arbor office, we serve clients throughout Washtenaw County.

For additional information on our reasonable flat fees that are available for real estate services, contact our experienced real estate attorney, Bill Ager for a free consultation by calling (734) 649-0784 , sending an email to bill@agerlawoffice.com , or using our online contact form.