Skip to main content
Add Me To Your Mailing List

 

Slideshow
Header images
 

MIG exists to serve the Memphis-area real estate investment community. Our mission is to provide our members the education, training, motivation and networking opportunities that will further the ethical investment in real estate.

 

If you think the price of education is expensive consider the cost of ignorance.

 

 

HomeBlogsRead Blog

Purchasing a Condominium

Purchasing a Condominium
8/16/2013 4:39 PM

        Joseph T. Kirkland, Jr. is an Attorney and Senior Escrow Officer with Tri-State Title & Escrow, Inc. and a former member of the board of the Memphis Investors Group. 
Finding out information you need to

know before you sign a contract

 

There are pitfalls when purchasing a unit in a condominium complex.  Many of them are peculiar to the condominium structure of ownership. 

 

If you have never been an owner in a condominium development, you need to know that you will own the space within the unit and usually the fixtures and features inside.  This includes the cabinets, interior walls, bathtub, sinks, toilet, doors, carpets and flooring.  You will generally not own the structure itself but will have a fractional ownership interest in those features.  These features include your roof, exterior walls, club house, party/meeting space, pool and other amenities.  This can vary from complex to complex. So you may want to review the “Master Deed”.  This is the document that sets up the ownership structure and governance of the project.

 

The Master Deed is the document that is filed in the public records defining your space, the common areas, insurance responsibilities, percentage of common ownership, membership in the Home Owners Association, the responsibility to pay dues and many, many other provisions.  One should not assume any facts about a condominium but should seek out and review all documents BEFORE making an offer to purchase a unit.  You may find that you are not suited to condominium living or that the complex you are going to be acquiring a unit in is not what you imagined.

 

Luckily in Tennessee you should be able to find out a great deal of information before you purchase but make sure you reserve the right to withdraw from a transaction until you have had the opportunity to seek out and review the relevant data on a condominium project.  In 2008, Tennessee rewrote their condominium enabling legislation to provide two important provisions concerning the disclosure if information about a project.

 

First, Tennessee codified the right of a purchaser, purchaser or lender to obtain the information.  Tennessee Code Annotated Section 66-27-502 provides:

 

Responsibility to provide information.

  (a) The association, upon request from a unit owner, a purchaser or any lender to either a unit owner or a purchaser, or their respective authorized agents, shall provide to the requesting party, within ten (10) business days following the date of the association's receipt of the request, the information specified in § 66-27-503, to the extent applicable. It shall be the responsibility of a unit owner to advise a purchaser or lender, upon request, how the association may be contacted. The association will be entitled to charge a reasonable fee for providing the information that, if not paid, may be assessed against the unit whose owner, lender, or purchaser requested the information.

(b) When construction of a condominium is not yet complete, a declarant, prior to the first sale of any interest in a unit to a third-party purchaser, shall upon request, and within ten (10) business days following the date of the declarant's receipt of the request, provide the information specified in § 66-27-503, to the extent applicable and to the extent available, to any purchaser or prospective lender to a purchaser. If any of the information is not available within ten (10) business days following the date of the request, then it shall be provided at least ten (10) business days prior to closing of the sale of the unit.

(c) The party requesting the information shall be entitled to rely on the information provided, unless the party has actual knowledge to the contrary.

(d) Any request to be made or information to be provided under this part shall be provided in writing or by electronic means, which may include, without limitation, by email or posting to a web site and providing a link and access to the web site.

 

This section defines the right to obtain the information authorized in the next section. And sets for the time frame within which it must be provided.  The information which may be requested and must be provided is set forth in Tennessee Code Annotated Section 66-27-503 which states:

 

Information to be provided -- General.

  The information to be provided pursuant to § 66-27-502 shall include the following:

   (1) The name and principal address of the declarant, during the period of declarant control only, the association, and the condominium;

   (2) A copy of the recorded, or if not recorded then in substantially final form to the extent available, master deed or declaration, bylaws, charter or articles of association of the association, and all amendments of and exhibits to the master deed or declaration, bylaws, charter or articles of association of the association;

   (3) A copy of the current rules and regulations of the association;

   (4) The most recent balance sheet, income statement, and approved budget for the association, or, if there has never been an approved budget, then the projected budget. The budget must include, without limitation:

      (A) A statement of the amount, or a statement that there is no amount, included in the budget as a reserve for repairs and replacements, and whether or not any study has been done to determine their adequacy, and if a study has been done, where the study will be made available for review and inspection;

      (B) A statement of any other reserves;

      (C) The projected aggregate annual common expense assessment by category of expenditures for the association;

      (D) The projected monthly common expense assessment, or the method of calculating each unit's share of the assessment, for each type of unit;

      (E) A description of any indebtedness secured by the common elements or other amenities owned by the association or available for the use of the unit owners; and

      (F) A description of any lease affecting the common elements or amenities owned by the association or available for the use of the unit owners;

   (5) Minutes of all meetings of the members and/or the board of directors of the association for the twenty-four-month period ending on the date of the request;

   (6) The current monthly assessment and any special assessment applicable to the unit in question, and the amount of any delinquencies in any assessments applicable to the unit;

   (7) Any fees or assessments due as a result of a transfer of the applicable unit;

   (8) The amount and nature of any additional fees currently imposed for use by members of the common elements or other amenities;

   (9) A statement of the insurance coverage, which may be provided in the form of an appropriate certificate from the insurer, maintained by the association that includes the types of coverage, limits and deductibles of the insurance;

   (10) A statement of any unsatisfied judgments and a description of any pending suits against the association;

   (11) A description of any pending suits filed by the association, other than for the collection of delinquent assessments;

   (12) The total amount of current monthly, annual, or special assessments for all units in the condominium that are more than sixty (60) days past due as of the most recent available report, but in no event more than ninety (90) days prior to the date of the request; and

   (13) Whether the board of directors is still under declarant control and, if so, when that period of control ends.

 

You may not want to review all of the information or even request it.  In Shelby County the Master Deed will be available free of charge on the Register’s website (register.shelby.tn.us) with a little searching. Other documents may be available directly from the seller of their real estate agent upon request.

 

If you do decide to request the listed information, also be aware that the association may make a “reasonable” charge for furnishing the documents.  There are several associations that have a flat charge of $500 to furnish the documents so either require the seller to furnish the information or compute the cost into your offer price.

 

After you receive the information, be on the lookout for a lack of reserves in the budget when the association has the responsibility for the outside maintenance.  Also look out for special assessments that may be coming up.  Some complexes have a right of first refusal allowing the homeowners association to purchase a unit that goes on the market and may give the association 30 days or more to decide after an offer is made for the unit.  Also be aware that the project may not allow rental of the unit or have other restrictions that may significantly impact your purchase decision or ownership rights.

 

In summary, when purchasing a condominium unit, as with all purchases, keep your eyes open and “LET THE BUYER BEWARE”.


0 Comments
Click here to view or add comments
Comments are subject to editing or deletion at the blog author's or club's discretion.
Handle      *

Max 500 characters -  characters left
 *
Subscribe 
Joseph T Kirkland
Purchasing a Condominium

Joseph T. Kirkland, Jr.is an Attorney and Senior Underwriting Counsel with CloseTRAK and current 2017 President of the Memphis Investors Group.?
Recent Posts
Blog Archive
August 2013