Unveiling condominimum mysteries
One of life’s mysteries is condominium regulations, and until you actually own and live in a condominium association, it’s a mystery that will probably remain unsolved.
I’ve written before explaining what condominiums are but because of the confusing nature of condo ownership, a quick review never hurts. A condominium is a legal entity which represents a type of ownership created by the legal system in order to define ownership of a unit or apartment. A condominium purchaser receives a deed to the unit just like a single family home and an undivided interest in the common elements.
Owners do not receive a deed to common elements, which are shared with all other unit owners. Typically common elements are pools, clubhouses, tennis courts, parking spaces, boat slips and roadways. Some of these common elements are considered limited common elements for the exclusive use of a particular unit owner, and in the case of some condo associations, what appears to be a common element like a boat slip or parking space, is actually deeded to the unit owner.
Therefore, if you are considering the purchase of a condo be sure you understand the difference between a common element, a limited common element and the rights associated with a deed.
One of the more confusing aspects of condominium ownership is the responsibility of the owner verses the responsibility of the condominium association. Generally speaking, the association maintains the common elements, and the unit owner maintains the unit. The condominium documents may require the association to maintain portions of the unit, and the declaration may further require that unit owners maintain certain common elements, especially if they are designated as limited common elements, another reason to understand how your association is structured.
Therefore, determining maintenance and repair responsibilities is typically a function of the interpretation of the condominium documents, no small detail. Typically if property insured by the association is damaged it is generally the association that must pay to repair it. However, there i Florida Statute 718.111, which applies to condominium insurance responsibilities under their master policy, which could override condominium documents in the case of a hurricane or other non typical occurrence.
Another mystery associated with condominium ownership is reserves. Reserves are set aside out of monthly maintenance fees to cover capital expenditures and deferred maintenance like roof replacement and building painting. Once reserves are established, these funds cannot be used for other purposes without an advanced vote of the majority of the voting interests of the association. This is another important regulation to check when you are reviewing the condominium documents of an association in which you are considering a purchase.
If the majority percentage is set too high like 80 or 90 percent of owners, it is almost impossible to come to an agreement and, therefore, reserve funds are “stuck” in the reserve they are earmarked for even if that reserve may not need the funds for years. Associations should find the sweet spot percentage that will provide protection to the reserve accounts but also give the association some financial flexibility.
Once you have entered into a contract to purchase a condominium you will have three days to review the condominium documents including the by-laws, rules and regulations and financial records before you go forward with the transaction. This may not be as much fun as reading Sherlock Holmes but it will clear up some if not all of the condominium mysteries. It could take years to demystify condo living but isn’t that all part of the fun of reading a mystery, elementary.