Dear PoP – How Important is a Condo Association?

Photo by PoPville flickr user Mr. T in DC

“Dear PoP,

I want to buy a condo in DC but they seller’s agent says the condo association is defunct. What kind of issues will I have with that? It is the only one I can afford and I don’t mind taking a small risk but is it worth it?”

For those who live in condos – how important is the condo association? What exactly do they do? Would a dysfunctional/defunct one deter you from purchasing?

16 Comment

  • Condo associations make a huge difference. I would pretty much never buy in a building w/ a defunct association. But may also depend a little bit on the building. If it is an older building, especially a smaller one, chances are it will need a lot of maintenance. That’s what the association is for. If no one is stepping up to the plate to keep the building maintained, who will? Probably you!

  • It sounds like the Seller’s agent is trying to tell you that you won’t be able to finance the purchase. Lenders have very strict requirements for condos that fluctuate depending on the percentage you are putting as your down payment (i.e. the more you put down, the more risk you are taking on, so the lender is less on the hook).

  • It all depends, but I would be neither as alarmist nor categorical as the first poster. I owned in an old (1910) building for 10 years with a defunct condo association. Never had a problem. Basically it comes down to the building management.

    Also, you are going to pay for maintenance in an old building whether you have an active or defunct condo association. A condo association is not a charitable organization that relieves owners of their responsibility to pay for maintenance.

  • I don’t understand what it means for the association to be “defunct.” The association owns the common elements, even if it has been inactive or there are no officers. As long as the association legally exists, then you could presumably move in, vote yourself President (or get the other, seemingly uninterested unit owners to vote for you), and run the association yourself as you see fit.

  • When is that photo going to finish loading?

  • Aside from the personal risk involved in buying in a building without a functioning condo association, you will likely have a very hard time finding a lender who is willing to underwrite your mortgage. The lender has the same concerns you should have which are that the common areas will become neglected because the condo association doesn’t collect the necessary fees to maintain the building. Also, most condo associations maintain the primary insurance on the building, so you may not even be able to insure your condo (this is a major sticking point for lenders).

  • Enought with the Mr. T fake tilt-shift pictures. They don’t look as good as real tilt-shift lens photos (they basically give me a headache).

    • Word. Don’t be seduced by gimmick photos, PoP.

      (captcha: “This smell”

    • ah

      It’s not bad tilt shift (faux) but rather a bad photo in which to apply the technique. You can’t have vertical planes like that where the top of the building is blurred. The blurring needs to be foreground and background.

  • If you can buy the unit, I wouldn’t worry about the defunct association too much. What’s more important is why the association is defunct, and whether you can deal with that underlying reason.

    Which building is it? I have a sneaking suspicion that you’re talking about the one I live in.

  • If it’s a small building (4 or less units) you might be ok. Just make sure that they have a master insurance policy and have your inspector look at the public spaces and roof of the building (even if you are buying on the ground floor). If it’s a larger building, I would stay away. Overall, this is a great question for POP’s law firm/sponsor to weigh in on. I don’t think most of us really understand what absolute responsibilities and liabilities come with owning a condo (with or without an association).

    captcha: \undersea cities\

  • I live in an older building and even with an association repairs take a very long time. Our management company sucks.

    It might not seem like a big deal when you’re in love with the idea of buying, but when you want to sell, other buyers may not be as forgiving.

    You could take the jump and try to revive it, but you’d be fighting the status quo/the easy way of doing things.

  • Honestly, condo associations are crap so you might be better off. They’re horrible – nothing is worse than a condo meeting.

    they are super important to be run well. However, if you have a very good property manager, chances are they are better off than a crappy Board.

    Our MGT company sucks, and so does our board…but with bigger buildings with many investors, it’s hard to have enough people who care in order to make a real difference.

    Yeah, I’m that jaded. I’ll never live in a HOA/UOA again.

  • If there’s no condo association, just prepared to BE the condo association. A friend of mine has put in hundreds of hours trying to put together one after buying a condo in a unit where the association was defunct. Personally, I’d stay away.

  • The status of the association is very important.

    If the building is old, the association’s financial status will give you a good idea of whether or not there are special assessments and large dues increases to come. With an older building, without the reserve fund to match, you may end up spending quite a bit more than the monthly condominium dues when something finally goes wrong. A resale package is going to be part of your due diligence in purchasing the unit and your realtor can help you make this an out clause, in case you do not like what you see.

    The size of the building is also something to take into account. A larger building may have an elevator etc. and expenses will increase to scale. When a large expense does present itself, your portion will be more manageable in a larger building.

    A smaller building will have a smaller budget, and fewer members to divide the expense between. Preparing for the future and these larger expenses will be a more important part of management for a smaller building.

    An inspection is also a great way to learn about the building’s overall health. If your association has no reserve fund, and the roof is 40 years old, you can bet that a large special assessment is in your near future.

    Newer buildings also have a lot of due diligence to do in their first two years. Pay attention to your developers bond with the city and its expiration, and your individual warrantee on your unit. Choosing not to look into the quality of your building will either cost you in legal fees or maintenance, depending on the route your association chooses to go.

    Now that you have heard that side, you must have rational owners in the building to help guide management of the property, or a management company that can help point members in the right direction. There are a great many ways to squander an association’s funds if no one is at the helm and paying attention.

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