THE FINE PRINT — What should I know before I buy a condominium?

April 30, 2014

By Jan Pierce

janpierceCondominiums can be appealing because of convenience. But before purchasing one, a potential buyer should consider that there are costs, both monetary and otherwise, to this type of ownership.

If simply seeking convenience, you could buy a traditional home and simply pay for a maintenance crew if you don’t want to do the upkeep yourself. The cost of the maintenance would be less than monthly condominium fees and you would be free of the complications and disadvantages of condominium ownership.

Buying a condominium unit is like deciding to move to a foreign country. Most people would research the foreign country and its government before moving to it, but hardly anyone does so when they consider buying a condominium. However, the law requires that you receive a complete set of condominium documents when you make an offer to purchase a condominium unit. This is because these documents convey a lot of important information. Review the documents carefully, and if you don’t understand them, review them with someone who does.

There will be several documents that relate to the nature and structure of the condominium “government.” The “declaration” document is like the Constitution; it lays out the basic legal framework for the government and it defines the transfer of control from the developer to a unit’s owner. As you might expect, the bylaws and rules determine how the condo owners govern themselves.

Realize that you will be subject to being governed by the condo board, a group of your neighbors, who will comprise the board of directors. Suffice it to say that there is often little or no screening to become a board member, so you can end up with a fairly dysfunctional governing body that has an inordinate influence over your life. Even worse is when the developer controls the board, either because the condominium is new, or because he or she has purchased the development after it has been foreclosed on. This means that instead of a mildly intrusive and potentially dysfunctional representative democracy, you could be living in a dictatorship.

Another important aspect of condominium ownership is the way a unit is valued. Factors that determine the value of a traditional home are its individual characteristics and quality, along with its location and neighborhood.

Valuation of a condominium unit is very different. It is determined almost entirely by its neighboring units, essentially representing average value of all the units in the complex. While often unfair, value is calculated this way because the units are almost exactly the same.

The condominium form of ownership may be appropriate for you, but there is extra work involved in becoming an educated consumer. Part of that education should include talking to your potential neighbors about how they feel about being citizens in their particular condo community.

Jan Pierce, S.C. is a law firm In Milwaukee that was founded with the belief that people can make a positive difference in the world and make a profit. The firm’s emphasis is on assisting small businesses and social entrepreneurs in all aspects of launching and managing their ventures. Disclaimer: Advice in this column is general legal information and does not constitute, nor is it intended to be, legal advice. Send your question to jan@janpiercelaw.com. To protect your privacy, your name will not be published.

 

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