You found a wonderful condo that meets all your requirements for a new home. The price is right and you won't have to worry about maintaining your homes exterior or the pool Before you make an offer to buy a condo, you need to read the Homeowner Association, or HOA documents. Why? You might find surprises about what you do and don't get for your monthly HOA fees … and decide not to buy this condo!
The story behind this article is a friend trying to figure out who is responsible for roof repairs on her townhouse. Like most people, she assumed the HOA would take care of exterior maintenance which includes roof leaks. Sadly she didn't read the HOA docs before closing on her condo. All she's getting for her $175/mo HOA fees is landscaping, pest control, a pool and gate that seldom works!
HOA Documents Define Rules & Responsibilities
There are quite a few HOA documents you should review before buying a condo. They'll explain how the HOA is organized, the rules and regulations, the HOA budget and don't forget to review the minutes of past association minutes. The most important document is the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) which is outlined here.
The document is long but typically half the document is exhibits. Below is the table of contents for the HOA document (117 pages) I reviewed for my friend. Items indented and flagged with an * were not identified in the table of contents.
- Cover Page (1 page)
- Table of Contents (5 pages)
- *Declaration Witnesseth (1 page)
- Article 1 – Definitions (5 1/2 pages)
- Article 2 – Property Subject to Declaration (1 1/2 pages)
- Article 3 – The Association (2 1/2 pages)
- Article 4 – Functions of the Association (3 pages)
- Article 5 – Easements (9 pages)
- Article 6 – Assessments (5 1/2 pages)
- Article 7 – County Restrictions Pertaining to Gated Communities (14 pages)
- Article 8 – Architectural Control (1 page)
- Article 9 Enforcement of Rules and Regulations (8 1/2 pages)
- Article 10 – Turnover (1 page)
- Article 11 – Maintenance; Insurance, Casualty Losses and Repairs; Party Sidewalks; Party Walls; Common Roofs (8 1/2 pages)
- Article 12 – Condemnation (1 page)
- Article 13 – District Requirements (4 pages)
- Article 14 – General Information (5 pages)
- *Signatures (4 pages)
- *Exhibit A – Legal Description (and Sketch) of PSE Property (4 pages)
- *Exhibit B – Legal Description (and Sketch) of XYZ Property (2 pages)
- *Exhibit C – Legal Description of Property XYZ Reserve (1 page)
- *Exhibit D – District Permit from local water management district (4 pages)
- *Exhibit A – Conditions for Issuance of Permit Number ### (11 pages)
- *Exhibit E – Articles of Incorporation of Association (9 pages)
- *Exhibit F – Bylaws of Association (9 pages)
Condo HOAs Typically Handle Exterior Maintenance
Most condominiums have multiple housing units in a single building. These may be attached townhouses or apartments with four to eight/more units per building. HOAs handle exterior maintenance for efficiency. A roof leak can span multiple units so there's no argument about who has to fix it. When you paint a building, you want to paint the entire building at one time.
My friend was surprised when her HOA said they were not responsible for repairing her roof leak. The leak is on her neighbor's roof but the water is leaking down into one of her interior walls. The HOA board told her she'd have to work out arrangements with her neighbor who says they're not paying because it's not a problem for their unit.
HOA Documents: References to Roofs
So let's look at how my friend's HOA has abdicated responsibility for what they call “common roofs” as documented in the HOA documentation outlined above.
- Common Roof – defined as the exterior roof covering, including all components and supporting structure, over a group of attached residential units (Article 1 – Definitions).
- Sub-Standard Maintenance – when it occurs, may be corrected (cleaning, painting, repairs, removal, replacement or maintenance) by the HOA, which will then place a lien on the subject property for all costs plus attorney fees and other collection costs (Article 4 – Functions of the Association).
- Easement for Repair, Maintenance and Replacement of Common Roof – gives the HOA the right to access the roof “in, under, over and across” any unit under a common roof (Article 5 – Easements).
- Easement for Construction, Maintenance and Performance of Obligations – gives the HOA the right to access the roof “in, under, over and across” a common roof plus a unit's interior (Article 5 – Easements).
- Individual Assessments – allows the HOA to assess individual owners for costs and expenses incurred to maintain, repair or replace common roofs, party walls and party sidewalks (Article 6 – Assessments).
- Exterior Maintenance – is the first red flag I found in my friend's HOA documents. It said each owner is responsible for maintaining the “exterior and structural elements, foundation and roof, and all fixtures and parts thereof and the exterior and structural elements of all other improvements located on your lot” (Article 11 – Maintenance).
- Exterior Maintenance Reserves – says the HOA “may (but shall not have the obligation to) provide for any reserves for the repair and replacement of Common Roofs, Party Walls, Party Sidewalks, or other improvements specific to the Townhome Residential Buildings, as the Association deems necessary or desirable;” (Article 11 – Maintenance).
- Standard condo insurance (H06) “covers everything from the drywall in if your property is damaged” so those buying condos may end up with no insurance coverage for exterior problems like my friend's roof leak.General Insurance – requires owners of residential units to maintain property coverage for fire, extended property-casualty coverage on their unit, including applicable portions of a common roof and/or party wall, plus contents and personal property (Article 11 – Maintenance and Insurance).
- Sharing of Repairs, Maintenance and Replacement – states “the cost of reasonable repair, maintenance and replacement of a Common Roof shall be shared equally by the Owners of the applicable Townhome Residential Building who make use of the Common Roof and shall be a lien against their respective Lots as provided hereafter.” (Article 11 – Maintenance … Common Roofs).
- Repair and Restoration – when a Common Roof is destroyed, damaged or needs structural repairs, this gives the HOA the right (but not the obligation) to either restore, repair or replace the roof with insurance proceeds. If insurance doesn't cover the costs, the homeowners will be responsible for sharing the costs equally or adjusted for one owner's negligence (Article 11 – Maintenance … Common Roofs).
- Easement for Repair, Maintenance and Replacement of Common Roof – similar to easements above (number 3 and 4), access is granted to whoever is handling repairs or replacement of the roof (Article 11 – Easements).
With my experience running a handyman business for eight years, serving more than 2,000 homeowners and 15+ condo communities, my recommendation is buyers should stay clear of any condos that refuse to handle exterior maintenance. There are too many red flags in this particular HOA document so how do you protect yourself?
In addition to the standard contingencies you put into a home offer (financing, home inspection, etc.), you should include contingencies to:
- Review HOA documents so you can identify risks like the ones outlined above. You may have to request a copy of the HOA documents which are provided until the closing which is too late.
- Get an estimate of homeowner insurance costs to identify extra costs like flood insurance which may affect your financing (read: How to Avoid Houses with a Flood Risk).