Different condo seekers have different criteria. For some, a pool is a must-have feature. For others, it’s all about the view. But there’s one thing that every prospective owner should have on their list of requirements: a healthy condo board.
From decreases in property value to hazardous living conditions, a poorly-managed building can have direct consequences for condo owners. That’s why it’s so important to watch out for the warning signs. In this post, I’ll tell you what you should look for.
1) The building looks rundown
A building’s general appearance can say a lot about how it’s being run. While some condo seekers inspect every inch of the units they view, most spend only a small fraction of their time looking at common areas. That could be a mistake.
When you’re touring a property, pay attention to whether the doors open and close easily. Check to see how clean the windows are. Broken security features can be a bad sign, as can badly-maintained landscaping.
2) There’s not much money in the reserve fund
If this is your first time condo hunting, you may be hearing the term “reserve fun” without having a clear idea of its meaning. Basically, a building’s reserve fund is there to cover major unexpected repairs. It comes out of maintenance fees.
You can find out how much cash is in a building’s fund by looking at the status certificate for one of its units. When the fund is too small, it may be cause for concern. But just how small is “too small?”
The annoying answer is, it depends. A number of factors, such as a building’s age, will determine the size of its reserve fund. The real question is whether the amount it contains is enough to cover upcoming expenditures. The condo board’s most recent reserve fund study (also contained in that all-important document, the status certificate) will help provide a fuller picture. Don’t forget to have a good condo lawyer review this information.
3) There’s pending litigation
When you’re reviewing a status certificate, there’s a possibility that you’ll stumble upon some information about a pending lawsuit.
While future litigation doesn’t have to make or break a deal, it should probably give you pause. Of course, there are financial risks involved in purchasing under these circumstances. But it’s also important to consider what a lawsuit says about a condo board.
Often (though not always), it’s irresponsible action on the part of management that leads to lawsuits. Looking into the details can help you make an informed decision.
4) The board’s minutes seem unreliable
Before you buy a unit in a building, you may want to request the minutes from its last condo board meeting. Owners have the right to see these records, and for good reason. Important issues are discussed at board meetings—including budgetary developments and changes to existing services.
Unfortunately, some boards aren’t completely transparent about what happens behind closed doors. Sparse minutes that omit crucial information may be a sign that something’s not right.
5) The maintenance fees don’t seem right
Most buyers avoid buildings with sky-high condo fees. But low fees can also be a sign of trouble. In particular, they may signal the fact that there’s inadequate money going towards building maintenance. And poor maintenance can lead to a decline in property value over time.
Of course, this isn’t a hard and fast rule. Toy Factory Lofts made headlines for its low fees, and by all accounts, it’s exceptionally well managed. Still, this building is the exception, not the rule. Bottom line: if the maintenance fees are seriously out of step with the averages you’re seeing in similar buildings, proceed with caution. It could be a red flag.
Searching for the right condo? I can answer all of your questions. Call or text me at 416-500-5360, or send me an email at rashid.notash@rogers.com and ask away!
