Buying a Condo? Decode the Key Documents and Techniques for Seamless Community Living

Buying a condominium is a major investment, and understanding the documents associated with it is crucial. Whether you're still considering a purchase or have already moved in, knowing how to decode your CC&Rs and HOA rules can help you make informed decisions and avoid getting your dog taken away (no, seriously).

Take a minute to find all your condo docs and let’s break down what you need to look for, both before and after you sign on the dotted line.

Watch the webinar on this topic here.

Pre-Purchase Due Diligence Techniques

Before diving into the purchase of a condo, you should conduct thorough pre-purchase due diligence techniques to safeguard your investment. Here is our checklist:

Before you even step inside the condo, take a drive or walk around the community. Look for signs of ongoing construction, like shoring, tarps, or patches on buildings. These could indicate ongoing repairs or structural issues that might not be fully disclosed in the paperwork. Seeing how well the community is maintained can give you an early insight into potential future expenses.

1 Picture of patch on the building

2 Picture of shoring

Requesting the right documents is a critical step in your due diligence. Ask for:

• CC&Rs (Covenants, Conditions, and Restrictions): These are the rules governing what you can and cannot do with your property. They can range from restrictions on pets to rules about exterior modifications. *Read carefully!*

Excerpt from CC&Rs of an actual HOA.

• Rules and Regulations: These often supplement the CC&Rs and provide more detailed guidelines on community living. Do you love your Halloween decorations? In this HOA, you have precisely 4 weeks of allotted holiday decoration time. (Does it count if I put a Santa hat on my Halloween Skeleton?)

Excerpt from CC&Rs of an actual HOA.

• Review the Reserve Study: This is an analysis of the HOA’s reserve funds and long-term maintenance plan. A healthy reserve indicates that the HOA is financially prepared for future repairs and replacements.

Excerpt from CC&Rs of an actual HOA

• Review the Meeting Minutes: Reviewing at least the last 12 months of meeting minutes can give you an idea of the community’s governance and financial health.
  
  
  
• Look closely at the Seller’s Form 17: Ask about any pending litigation or claims against the condo association. This could be a red flag that the community is dealing with significant issues that could affect your investment. Form 17 (the Seller Disclosure Statement) in Washington State, for example, will also reveal any known defects or disputes that could impact your decision.

Excerpt from a document of an actual case.

• Review the Public Offering Statement (for New Constructions): A Public Offering Statement (POS) is a set of documents prepared by the attorneys representing the builder of a newly constructed condominium building. If you’re purchasing new construction, this is MUST-READ. It provides information about the development, including construction timelines, estimated completion dates, the budget, fees, ownership interest, any warranties, and other relevant details for potential buyers. Understanding this document can help you spot potential red flags before they become your problem.

Hiring a professional inspector to assess the property is an important step in the due diligence process. While your drive or walk around the community can reveal obvious issues, an inspector will provide a detailed evaluation of the condo's structural integrity, plumbing, electrical systems, and more. They can identify hidden problems, such as water damage, mold, or substandard construction, which might not be immediately visible. Their expert eye ensures you’re fully aware of the property’s condition before making your purchase, helping you avoid costly surprises down the road.

Understand All the Paperwork

Once you’ve purchased the condo, it’s time to dive deeper into the documents that will govern your life as a homeowner.

Here are the key ones to understand and read through:

1. Purchase and Sale Agreement

This is the contract you signed to buy your condo. It outlines the terms of the sale, including the purchase price, closing date, and any contingencies. Keep this document handy in case any disputes arise after closing.

2. Bylaws

The bylaws define how the HOA is governed. They outline the roles and responsibilities of the board of directors, the process for electing board members, how meetings are conducted, etc. Understanding the bylaws can help you navigate the political landscape of your community.

Excerpt from a document of an actual case.

3. CC&Rs

You’ve seen these before, but now that you’re an owner, it’s important that you fully understand them. The CC&Rs are the backbone of the community’s governance, dictating what is and isn’t allowed. Violating these rules can result in fines or even legal action, so take the time to familiarize yourself with them. If you’re planning on making this new condo a short-term or long-term rental, think again…

Excerpt from a document of an actual case.

4. Rules and Regulations

These are supplements to CC&Rs and typically more detailed, covering the day-to-day expectations of living in the community. They might address things like noise levels, parking restrictions, or the use of common areas, etc. Knowing these rules can help you avoid conflicts with your neighbors and the HOA.

Excerpt from a document of an actual case.

Conclusion

Decoding and understanding your condo documents isn’t just a formality, it’s a key part of being a responsible homeowner. Whether you’re still in the buying process or settling into your new home, taking the time to grasp these documents can save you from potential headaches down the road. But you don’t have to do it alone. If you’re feeling overwhelmed or unsure about any part of your condo docs, just schedule a call with one of our building doctors. We are here to help and equip you so that you can enjoy the condo life with happiness and confidence.