Question: I’m a bit nervous about moving into a condo and we’re expecting to receive the condominium disclosure documents (resale package) soon. I’ve heard these are pretty large packages. What sort of information can we expect to get and what should we pay the most attention to?
Answer: Fear of condos is real! Last week I had a client tell me he’d been warned against buying a condo because the Board can raise fees whenever and however much they want. First, keep in mind that the Board is made up of your neighbors who also have a vested interest in keeping payments low and the community in good health. Second, this is why the condo document review period is a critical step in the purchase process.
Your Rights As A Buyer
You have a non-negotiable right in Virginia (also in D.C. and Maryland) to receive a Condominium or Property Owners’ Association Disclosure Package (aka Condo Docs or Resale Package) if you are purchasing property that’s part of an Association such as condo ownership or Homeowners’ Association.
These documents can be provided to you as soon as you go under contract (ratification). You’ll want to start your review ASAP because you have three days from receipt to void the contract for any reason, without risking your Earnest Money Deposit.
What You’ll Get
The official list of required documents and statements in a condo resale package can be found here. It includes critical information like the by-laws, budget, rules & regulations, monthly or special assessments, reserve study, proof of insurance, pending lawsuits, unit violations, rental caps, and much more.
What To Review
Your purchase binds you to every rule, penalty, and fee detailed in the condo docs so you should take the time to read everything. Is Fido 70 lbs and your new building restricts pets over 25 lbs? Brutal. Spent $1,500 on a fancy new grill in a community that restricts open flames? Craigslist will take it for $400. If reading 300 pages isn’t your thing, here are some of the most important things to check:
- Monthly/Special Assessments: Confirm they’re as marketed
- Budget: Make sure expenses seem reasonable and look for any debt payments (ask questions if you find them)
- Reserve Study: Condos should be inspected every five years with a resulting report (Reserve Study) of projected replacement and maintenance costs compared to projected/recommended reserve fund balances over the next 30 years. Find the financial summary to see if there are any projected shortfalls and cross-reference the current reserve fund balance with the projected and/or recommended reserve fund balance.
- By-laws/Rules: If you have a pet, plan to rent, or anything else important to you, verify the by-laws and rules meet expectations
- Meeting Minutes: Review the latest meeting minutes for any discussion of major expenditures/issues
Sellers should try to produce the resale package as quickly as possible because of the Buyer’s ability to void the contract within three days of receipt. As a Seller, the last thing you want is to delay the delivery of the package for weeks and watch your Buyer walk away close to the settlement date. In Virginia, Associations have 14 days to deliver the resale package from the date of request, although most turn it around in a few days.
