Five Red Flags to Watch For During Condo Document Review
When buying a condo, reviewing the condo documents is one of the most critical steps in the process. These documents reveal essential details about the building’s financial health, management practices, and potential risks. Ignoring red flags during this phase could lead to costly surprises down the road. To help you make an informed decision, here are five major red flags to look for when reviewing condo documents, taken from an Urban Turf article written by Pavan Khoobchandani, an attorney who reviews condo docs for many of my clients.
1. High or Increasing Condo Fees
Condo fees cover shared expenses like maintenance, repairs, and amenities. While some fluctuation is normal, excessively high or rapidly increasing fees can signal financial mismanagement or significant upcoming expenses. For example, if the building’s reserve fund is underfunded, condo boards may raise fees to cover future repairs.
What to Do: Compare the building’s fees with similar properties in the area and ask for a breakdown of what they cover. Look for any patterns of frequent increases in recent years.
2. Frequent Special Assessments
Special assessments are additional charges imposed on owners to cover unexpected costs or major projects. While occasional assessments are normal, frequent ones may indicate poor planning or unresolved structural issues in the building.
What to Do: Review past meeting minutes and financial statements to understand why assessments were issued. Ask if there are any planned assessments on the horizon.
3. Outdated or Missing Reserve Study
A reserve study outlines long-term repair and replacement needs for major components like roofs, elevators, and HVAC systems. If this study is outdated (older than five years) or missing entirely, it could mean the condo association is unprepared for future expenses.
What to Do: Ensure that a recent reserve study has been conducted and that the reserve fund is adequately funded based on its recommendations.
4. Restrictive Bylaws That Don’t Fit Your Lifestyle
Condo bylaws govern everything from pets to rental policies and even smoking rules. Restrictions that don’t align with your lifestyle—such as bans on short-term rentals or limits on pet ownership—can lead to frustration after purchase.
What to Do: Read all bylaws carefully and ensure they align with your current needs and future plans for the property.
5. Lack of Transparency in Meeting Minutes
Meeting minutes provide insight into how the condo board operates and addresses issues within the community. A lack of detailed minutes—or their complete absence—could indicate poor governance or unresolved disputes among residents.
What to Do: Ask for recent meeting minutes and look for evidence of clear communication and proactive problem-solving by the board.
Why These Red Flags Matter
Ignoring these red flags during your condo document review could result in unexpected costs, lifestyle conflicts, or ongoing disputes with other owners or management. By identifying these warning signs early on, you can make a more informed decision about whether a particular property is right for you.
For personalized advice on navigating your next condo purchase reach out to me!
