Buying a Condo in Ann Arbor? What You Need to Know Before You Sign

Owning a condominium is very different than owning a typical residential property. Whether it’s evaluating the financial health of a condo association or considering the restrictions tied to your ownership of a condo, hiring an experienced real estate attorney will help you to spot all the red flags before you get too far along in the process. Documents to review with your attorney include the master deed, bylaws, current financial statements, annual budget, minutes from the most recent annual meeting and other related documents

Master Deed and Bylaws.

These are the governing documents of the condo association and address how the association is formed, how the board of directors are elected, how meetings are held, defines property rights, legal descriptions of units, and unit percentages. The bylaws govern the association’s operation, maintenance and provide the rules and regulations of the association including ownership restrictions. Bylaws also include various use and occupancy restrictions on the condominium units, including restrictions on owning pets, making improvements and modifications to condos, renting units, signage and commercial activities and parking vehicles. and owning pets and animals. Because bylaws can cover a wide range of activities and uses, it is critical that a prospective buyer, along with their attorney, thoroughly review these documents.

The Financials and Budget.

Determining the financial health of the condo association is an essential part of purchasing a condo. Red flags to be concerned about include low cash reserves, deficits, common charges that have gone up considerably over the years and reoccurring special assessments. Reviewing the minutes from the most recent annual meeting and talking to a board member of the association will help determine whether a special assessment or an increase in monthly fees is on the horizon.

Maintenance Responsibilities.

An owner of a condominium has exclusive ownership and occupancy of their own unit and generally has the responsibility to maintain the interior of their unit, including the walls, flooring and attached fixtures. Although each unit owner has exclusive ownership of the space inside the inner walls of their structure, an owner of a condominium is considered a “co-owner” because all owners in the condominium complex also own an interest in the common areas, referred to as the “general common elements” and the “limited common elements.” Consequently, in addition to inspecting the condition of the condo unit itself, it is also important to evaluate the condition of the common and limited common elements for an idea of the overall condition of the condo complex. A need for repairs or maintenance of these areas of the condo complex can be an indication of mismanagement or a lack of association funds.

Other important considerations and red flags.

• Percentage of Owner-Occupied Units. Evaluate the percentage of units that are owner-occupied as opposed to rented. A high owner-occupied percentage will generally be a positive sign showing that the majority of owners have a vested interest in the overall maintenance and financial health of the association. Conversely, a high rental percentage for an association will be a concern for many lenders which could cause a loan to be denied. This can impact not only a condo purchase but also its resale value.
• Financial Instability: Look for low reserve funds, frequent special assessments, or rising HOA fees in recent years.
• Pending Lawsuits: Pending litigation involving a condo association can impact financing a condo purchase and also reveal financial instability or mismanagement.
• Always Include an Attorney Review Contingency in Your Sales Contract. Always make a condo purchase contingent on an attorney’s review of the sales contract, all relevant condo documents and a disclosure of all fees that the owner of the condo unit pays to the condominium association.

Your Next Step: Schedule a Consultation with an Experienced Ann Arbor Real Estate Attorney.

Buying a condo has many advantages but it also comes with many challenges. Consulting an experienced real estate attorney is essential to understanding and protecting your rights.

Attorney Bill Ager helps individuals and families with all aspects of purchasing, selling and owning condominiums. From his Ann Arbor office, he serve clients throughout Washtenaw County.

For additional information on his reasonable flat fees for real estate services, contact Bill Ager by calling (734) 649-0784 , sending an email to bill@agerlawoffice.com , or using his online contact form.