Be a Smart Condo Buyer:Know Your Condominium Law
Many buyers don’t realize that buying a condominium is much different from buying a house. It is strongly advisable to obtain expert legal advice from a lawyer who understands condominium law prior to buying a condominium so you do not end up in a financial nightmare.
Before making an offer, you should thoroughly understand:
- Details of the condominium unit and common property
- Rights and responsibilities of ownership
- Amount of monthly condo fees
- The existence of, or lack of, reserve funds and special assessments
Make sure you work with your Realtor® to obtain the following documents prior to finalizing your purchase:
- Estoppel Certificate
- Certificate of Insurance
- Financial Statements of the Condominium Corporation
- Bylaws of the Condominium Corporation
The purchase agreement typically used by Realtors® provides that the purchase is conditional upon the provision of these documents by the seller and the satisfactory review by the buyer.
The Estoppel Certificate
This document is provided by the condominium corporation and certifies:
- The status of the monthly condominium fees
- The existence of special assessments
- No liens or charges against the title exist
This certificate protects you against future claims if any of the above certifications are found to be inaccurate.
The Certificate of Insurance
This document should be reviewed to determine the adequacy of insurance coverage on both the individual units and the common property.
The Financial Statements
The corporation’s financial statements will provide you with the following information:
- An indication of the financial position and quality of financial management of the corporation
- The adequacy of the corporation’s reserve fund
- The reasonableness of the corporation’s budget
You may want to seek the assistance of your accountant to review the corporation’s financial statements.
You should, with your lawyer’s assistance, carefully review the condominium bylaws to determine if there are any issues you find unacceptable.
The condominium bylaws include:
- Information on the operation and management of the corporation
- Condominium board election and meeting procedures
- Rights and restrictions on the use of individual units and common property
- Responsibilities of owners