September 21, 2023

Epic Law

The Law Folks

Condominium Ownership Is a Great First-Time Buying Opportunity – It Also Requires Savvy Expertise

Condominiums are a popular choice for many buyers because of ease of care and affordability. But there are important things to know about owning a home that is part of a homeowner association.

When an owner closes escrow on a condo, he or she is actually buying the internal space inside the unit, and automatically becomes an owner in common with all the other owners in the development of the common areas. Common areas are managed jointly with the other owners, and issues affecting them, including the election of association board members, are decided jointly with other owners. The association’s foundational conditions, covenants and restrictions (CC&R’s), its by-laws which govern the conduct of the association, and operating rules governing use of the common area are three important documents to examine before you close escrow. You should also request the annual financial statement, information on upcoming or current assessments or fees, the minutes of the previous 12 months, and a copy of the annual budget which should also reference its reserve study and future planned financial expenditures, and review them carefully.

Your review should include information on whether the association is incorporated or not, is it part of a mutual benefit association, how and when dues are collected, what services are included with your dues payment, your parking assignment, or rules about common areas such as hours of pool use. Another topic to consider is what changes an owner is permitted to make to his or her unit with or without permission. Some new owners may find this objectionable, but the fact is that owning a condominium or house within an association does mean the homeowner has to conform to certain requirements. For example, if a condo owner in an attached multi-unit building removed a load-bearing wall without a proper consultation or replacement, the impact on adjoining owners over time could be physical (stress cracks) and probably have financial and legal consequences as well. Don’t be afraid to take the time to ask questions during escrow; you may not be able to contact the Association directly, but your agent and the seller should cooperate in helping you to get as many answers as possible.

An association may not have updated its documents to reflect current law, which does not mean the association is not obligated to follow current laws. It’s still not uncommon for many smaller associations (less than 30 units) dating from before the 1980’s to operate under their original documents. Knowing if there is an accountant, or a property management company and if the association has access to legal advice is very important. If there is a property management company involved, you would want to know what services it provides. You might want to ask if the annual budget provides for training updates for all board members-new laws are introduced almost every year and associations are required to keep current with legal requirements.

In California the part of the Civil Code known as the Davis-Stirling Act is the ultimate authority governing “common interest developments” and overrides association documents including those that may not be up-to-date. This Act also contains the provisions for dispute resolution procedures between owners and associations, as well as specific election procedures, requirements for document disclosures, meeting notice and agenda laws, and owner participation at meetings. There are also other laws, including the Corporations Code and Vehicle Code, connected to common development interests. A handy reference book found in bookstores and online is The Condominium Blue Book by real estate attorneys Brandon E. Bickel and D. Andrew Sirkin.

Being an owner in a homeowner association has many benefits, but it also has responsibilities that go beyond that of living on an independent plot of land which is completely under an individual owner’s control. There is, in essence, an additional layer of government–the association and all the regulations attached to it. There is also for many people a freedom from daily maintenance which they welcome as part of their lifestyle.