Condo Association Documents

Understanding Condominium Home Owner Association Documents – HOA

The majority of downtown San Diego homes are attached condominiums governed by condo homeowner association documents (HOA).

It is important to know that if you are considering purchasing a condo or PUD project, that you are sharing in the common maintenance, insurance, and cost of running the project.  A planned unit development may or may not be attached but still has an HOA that governs common areas and costs.  An example of this would be The Bridges in Rancho Santa Fe or the Rancho Santa Fe Covenant.

The typical HOA dues for a downtown high rise condo range from a low of $300.00 per month to over $1,800 per month.

The more amenities the building has the higher the HOA dues, with 24 hour security, concierge, and high maintenance cost adding to the monthly expense.  Part of the HOA fees are for reserves to fix future problems with the building, replace roofing, HVAC equipment, common area carpeting, and many other expenses.  Some HOA’s are managed better than others to keep the costs under control.

You should think of a homeowners association fee partly as a lifestyle choice and also as a savings plan for maintenance.  Living downtown you won’t have yard care service, water and trash bills, pool or spa cleaning, or the expense of common area insurance.   You should try and find a building that offers the amenities that are important to you, and avoid those that are not, since the HOA expense won’t get any less expensive.

According to the California Residential Purchase Agreement, which is used in most re-sale purchases, the Seller should give you all the condo association documents within 7 days.  Rarely does this happen since most condo associations are managed by professional management companies that take some time to produce the required documents.

The California Residential Purchase Agreement calls for the following within 7 days.  The Seller has 3 days after acceptance to order the HOA documents.  This information is on Paragraph 7 of the current California Residential Purchase Agreement (RPA).

1. To disclosure if the property is a condominium or PUD.
2. Copies of any documents required by law – see California Association of REALTORS® Q&A below.
3. Any pending or anticipated claim against the HOA.
4. Statement including the number of designated parking spaces or storage areas.
5. Copies of the 12 most recent condo association minutes for both regular and special.
6. Names and contact information of all HOA’s governing the property.

Here are some important tips for you and your real estate agent regarding condo association documents.

1. Litigation or threat of litigation is very common.  Most HOA’s will sue a developer for construction defects before their deadline passed according to California Law.  There is an arbitration process beyond the scope of this post.  Depending on what type of litigation or threat financing may be difficult to impossible.
2. It is very important to get all 12 months minutes of both scheduled and non-scheduled HOA meetings.  If there is a problem or issue this is where it will first turn up.  For anyone that has been to these meetings you will always have some disgruntled or paranoid homeowner so don’t be alarmed.  Check out any disclosure to make sure you fully understand the scope and want to become a part of it.  You will find that many HOA management companies do a very poor job in providing the complete set of meetings.  It has been my past experience that sometimes very important issues are somehow not provide – get a statement from the HOA regarding any missing minutes.
3. Don’t rely on anyone to completely review these documents.  If you don’t understand the financial disclosures have a appropriate professional review and explain them to you.
4. Make sure that your parking space and storage area are clearly defined in the HOA documents or on the Preliminary Title Report.  Don’t rely of someones word.
5. Most multiple listing information is incorrect regarding HOA monthly fees.  Confirm the correct amount and if there is discussion on raising them due to poor financial reserves or required repairs.
6. Finally who pays for the HOA documents and transfer fee is negotiable.  These fees can be quite expensive and usually are paid by the Seller.

Check out a complete list of disclosures required on condo association documents by the California Association of REALTORS®.  Another resource is a publication by the Department of Real Estatediscussing financial reserves from the HOA perspective.  I find this helpful in understanding what a good financial statement looks like.

Photo courtesy of Flickr.