Condominiums may take the form of office space, an apartment, half of a duplex, or even a single family home located on commonly owned property. Condominiums offer the benefit of owning your own “unit” while sharing the responsibility for maintenance of areas like lawns, driveways, hallways, sidewalks, roofs and often garage or storage areas. The concept behind the creation of a condominium is to allow ownership at a lower cost because the maintenance of many areas of real estate property can easily be shared.
The rights and obligations of a condominium are basically controlled by three documents. The By-laws Declaration & Association of the condominium are similar to the By-laws of a corporation. They define the procedures for managing the condominium. The second document, the Declaration, specifies the rights and obligations of both the association and the individual members. Finally the rules, created by the directors of the Condominium Association, can govern or regulate conduct.
Most large Condominium Associations are run by a management company. The management company reports to the board of directors of the Association. The board of directors of the Association usually has open meetings where members are allowed input. Members on the board are elected for various length terms. The board has the final say with regard to management decisions though it usually defers to the recommendations of Association’s management company with regard to input.
The real problem with condominium ownership is that, of course, people often disagree as to group decisions. The issue that creates the most problems for Condominium Associations is how to spend the money from the dues charged to the members by the association. Most Associations build up a reserve account. A reserve account is a bank account where money is deposited in excess of the daily operating budget.
The purpose of depositing money in this account is to deal with major expenses that are incurred down the road. If there is no money in the reserve account, the association is required to declare a special assessment and often obtain a large sum of money at one time from each of the members. If funds build up in a reserve account, these special assessments are often unnecessary.
The issue that confronts members that generates the most litigation is an issue where there is a common area that needs repair that doesn’t affect most of the members of the Association. For example, if a basement under one unit needed repair, or a roof was leaking over just one unit, often the Association as a whole isn’t very enthused about repairing a basement or a roof that only benefits one of the members. A basement under one unit may require $20,000 worth of repairs. The other units will receive absolutely no benefit from these repairs. It is often difficult to convince the other unit owners to spend $20,000 of the association’s money fixing the basement under one unit. This may be true with regard to any number of issues including leaking roofs, defective plumbing, mold issues, or hazardous materials. Where only one or even a very few units suffer a major issue, those unit owners often have great difficulty convincing the association to fund the repairs of their units.
Disputes often arise concerning what areas specifically belong to the unit owner and what are common areas that are the responsibility of the association. The condominium declarations often define these issues differently. Some declaration documents refer to unit ownership as the air space inside the interior wall surfaces. Most refer to the unit ownership as the air space and the interior air space of the walls, ceiling and floor. Some condominium documents provide the unit owner owns not only the interior air space and interior surfaces but also the drywall paneling, ceiling and floor material itself.
Once both the common area and the individual unit areas are determined, then the responsibility for repair or maintenance can be ascertained. Even these issues can be controversial as there are often differing opinions as to how repairs should be made. Unit owners want complete and thorough repair where as the Association is usually looking for the cheapest repair possible. This issue may be the most common basis for lawsuits between condominium owners and their respective associations.
Related to this issue are problems involving the failure of sellers of condominium units to disclose what has been going on with the association. Sometimes associations are contemplating major or future assessments such as replacing roofs, where they have very little in reserve funds. The unit owner is aware of these facts and may or may not disclose these to a perspective buyer. Most condominium buyers do not want to buy into an association where they are going to be assessed large amounts in the immediate future.
Condominium ownership isn’t for everyone. While it can provide ownership of an apartment or other living quarters at a reduced rate, the offset is working with strangers to resolve conflicts regarding common areas and management practices. Prior to purchasing a condominium, it is very important to understand what is going on with the association, its financial status, the company that is managing it, and what its plans are over the next five or ten years. Without fully understanding all of this information it is unwise to buy into an association that may present problems down the road.