Condo Associations
How important are “Condo Associations†when buying into a condo complex? Extremely, and you better do your homework before going forward on that condo purchase. A well run condo association can mean the difference of thousands of dollars to you. How is that possible?
A condo association is basically a manager of a business. There are business owners that are different and better than others. The same with a condo association. If an association running condos is efficient and knows what they are doing, they’ll make the life of the condo owner so much better. Let me give you a few examples.
Let’s say that a condo association president takes on the position but decides not to produce results. He sits back and does not pay attention. The roof starts leaking and he hesitates too long and what normally would have been a repair for the condo complex, turns into the need for a brand new roof. He goes to the reserve fund and realizes there’s not enough in the fund because the budget was not set up properly. Who has to pay for the new roof? Everyone owning a condominium in that complex would have to pay. If you own 3% of the complex based on the size of your unit, you’ll pay 3% of the roof. This is what is known as a special assessment.
Special assessments are mainly due to mismanagement of a condo complex. If the condo association was run right, there should be no need ever for a special assessment. When a complex is turned into condos from apartments known as condo conversion or when a new constructed condo complex is built, the condo association is put in place. This is the time when all the budgets are put together reviewing what the expected expenses are going to be for the complex. Will expenses increase over time? Of course they will. So there will have to be increases along the way. Too many condo associations, when setting u the books and numbers in the beginning of initiating a condo association, fail to plan for all the “what ifsâ€. It’s extremely important to budget fpr everything that could go wrong. If there is a large surplus of funds in the association account, there can always be a return of capital.
Condo associations can really make or break the sale of your condo when it comes time to exit as well. Imagine trying to sell your condo to an individual when there’s a special assessment of thousands of dollars on your unit because of a mismanaged association. Beware and do your homework before buying a condo!
Condo Associations
Condo associations were originally created as a legal entity for the purpose of developing, managing and selling a development. It allows the developer to exit financial and legal responsibilities typically by transferring ownership to the condo owners after selling off a pre-determined number of units. Most condo associations are non-profit corporations and are subject to state statues that govern such corporations. Oversight of these associations runs the gambit from strict regulation to virtually no oversight at all. It should be an integral part of your research to be aware of the importance of investigating the association when you buy a condo.
Condo associations have certain duties and responsibilities for not only the day to day operations but for long term planning. It is the association that monitors adherence to the by-law and regulations so before you buy make certain that you can live with these regulations, they can make your life in the condo complex very enjoyable or an unpleasant experience.Â
Condo associations for the most part will take care of all of the exterior upkeep of buildings and grounds. It varies little from most associations so it is important to have a clear idea of exactly what will and will not be covered so there are no surprises when you find out if repairs are needed. No matter what state you live in every condo association is required to file a declaration of covenants, conditions and restrictions. The document discloses how the condo association is to be structured, what its duties and responsibilities are, and what restrictions are to be placed on the owners. In most cases, this document will be specific, for example, it may stipulate exactly what interior window coverings are acceptable. Obviously the goal is to create as much uniformity as possible throughout the complex.
One last most important area to investigate is the financial health of the association. Associations are required to develop an annual budget for both the condo association fees and expenses. The association must also state the current financial condition. If the condo association is solvent, the more you as a condo owner will be protected. Remember if there is an expensive repair that is the responsibility of the condo association and there are not enough reserves available then the only place to get the needed funds is from the owners. The only way to get those funds is with a special assessment. Investigating the association can head off many of these types of problems before they become too costly to you the owner.
Condo Association Officers and Directors
Navigating the language and definitions of the condo world becomes pretty easy with some simple exposure and a handy resource, such as the popular Frequently Asked Questions (FAQs) section on our website.
We recently received a couple questions concerning Directors and Officers of a condo association board. What do they do and who are they?
Generally speaking, in Illinois, the Directors make decisions about the association and the Officers carry out those decisions. The Directors and Officers are volunteers from the ranks of the condo owners. These volunteers are nominated for the roles or they nominate themselves. The condo owners vote to select the Directors from among the nominees, and the Directors vote to select the Officers. Officer positions typically include President, Vice President, Secretary and Treasurer.
Look for a expanded version of our FAQs coming soon.
