One of the best things about buying a condominium is that we don’t have to worry about anything outside the walls of our unit – sort of.
Exterior maintenance, including big ticket items like roofs, windows, doors, parking lots, etc., are all typically covered by our Condo Fees and Reserve Fund. This doesn’t mean we don’t pay for these things – it only means that they should be budgeted for and carried out by our Board and management company (if we have one).
When buying a condominium, it’s always of critical importance to request and review a full set of Condo Documents. What follows is a list of documents you’ll need to read and understand:
These are the rules of the community. I scan the entire document, paying special attention to some sections. Who is a allowed to live there? Is there a deposit required for tenant-occupied units? What’s the policy on pets? What about extra parking? Who’s responsible for what parts of exterior maintenance? A tight set of Bylaws is often an indication of a well-run community.
If the complex is professionally managed, there should be a management agreement in place. What are the terms and conditions of this agreement? What can you expect as an owner?
Annual Financial Statement
This is usually an audited statement including Income, Balance Sheet, and Cash-Flow for all accounts. I want to know if revenue and expenses are reasonable and consistent for the size and age of the complex.
Operating a condominium development can be an expensive proposition. I’m looking for a well-planned budget; I want to know what maintenance or upgrades are scheduled for the year or years ahead.
Current Financial Statement
A lot can change from the time of the last annual statement! The fresher the information, the better.
A portion of insurance required as an owner is included in your condo fees. Check that the certificate is current. See what potential liabilities are covered. Find the part the states replacement cost and divide by number of units, or even dollars per square feet. Is it sufficient? If the policy hasn’t been updated recently, you may want to personally purchase additional coverage. A Standard Insurable Unit Description (SIUD) document will help you understand what you’ll need to cover.
Reserve Fund Study/Plan
In Alberta, an engineering study is required every 5 years. This will tell you what major expenses lie ahead. Compare recommendations with reality, and make certain that the financial statements and budget provide at least a fighting chance of maintaining the value of your investment. The alternative is big jumps in condo fees, and/or potential of nasty Special Assessments. (The ‘Study‘ is a report prepared by an engineering firm; the ‘Plan‘ is a document prepared by the Condo Board to show owners how they can expect the Study to be implemented.)
This is usually a single page that reveals key information pertaining to your unit. It will also tell you if there are surprises like pending lawsuits.
Board Meeting Minutes (12 months)
A quick read through Board Meeting Minutes will give you a good idea of major issues and annoying little concerns that your Board has been contending with. Are issues quickly and satisfactorily resolved?
Annual General Meeting Minutes
Once a year, all Owners are invited to a General Meeting. Do they come? Are there any major concerns expressed? What can you learn about your past and present Board?
If all this seems a little daunting, you may want to engage the services of a firm that will perform this part of your due diligence for you. A concise report should highlight areas that might be of specific concern to a new condominium owner.
Get in touch with me if you’d like to learn about how I turn potential deal-breakers into opportunities.