Condo docs are given to you after you have ratified a contract to purchase a property in Bethesda or around the DC metro area. However, navigating the condo document review period can be complex, particularly when it comes to understanding the governing documents and financial health of the community association. In Washington, DC, Virginia, and Maryland, District and state laws provide specific timeframes during which buyers can review these documents and make informed decisions about the unit and the building.

Condo and Coop Documents – Safeguard Them

Whether you are purchasing a condo or cooperative unit, you will receive a big package of documents for your review.  You may receive them as a hard copy and sometimes the documents arrive electronically.   If you receive a hard copy, be sure to read them carefully – and then save them.  If you receive them electronically, you should download them to a file that you can access in the future.  Very often the electronic link will expire and if you haven’t downloaded them, you will not have access to the documents in the future.

Remember that a condo can be a townhouse such as the ones at Kenwood Forest or that are part of the Whitehall on Battery Lane  or a unit within a building like the Darcy, Madison Park or the Stonehall.   Condo refers to a legal construct rather than the construction itself, so remember when you are buying a condo or coop, regardless of what they look like, you are entitled to documents for your review. Similarly, if you buy a home in a home owners’ association, you are entitled to documents laying out the governance and finances of the community.

Difference Between Condos and Coops

When you buy a Bethesda condo or a coop – or anywhere else in the DMV, you automatically become a member of the building’s condominium association or a shareholder in the cooperative entity. In a condominium, you own the interior of your unit or the space inside the interior walls.   The condo association will maintain the limited common elements such as the roof or the decks and lobby while you are responsible for the interior of your condo, including the appliances, furniture and other features.

The building’s exterior and common areas are collectively owned by all the unit owners through the association. The association, typically governed by an elected board of directors, is responsible for maintaining common areas, enforcing rules, and managing the building’s finances.

For cooperative buildings, ownership is structured differently. Instead of owning the unit outright, you own shares in the cooperative corporation, which owns the building.  Your shares entitle you to occupy a specific unit, and cooperative boards often play an even more active role in decision-making and rule enforcement.

In both scenarios, condo or co-op owners must pay monthly fees (association fees) to cover maintenance, repairs, and other shared expenses. The rules set by the board are enforceable, and buyers must follow them once they become owners.

What is Included in the Condo Docs?

The resale package, provided by the seller, is a comprehensive set of documents outlining important details about the condo association or cooperative.

Here are the essentials:

1. Declaration and Bylaws: These documents spell out the rules and regulations governing the condo or cooperative, including the rights and responsibilities of unit owners, the election of board members, and maintenance duties. Pay close attention to any restrictions on noise, pets, renovations, or rentals.

2. Articles of Incorporation: This legal document establishes the condominium association as a nonprofit entity.

3. Rules and Regulations: These community-specific rules cover everything from parking to noise control. Make sure you are comfortable with the community’s guidelines.

4. Resale Package: The resale package includes financial statements, insurance policies, and any pending special assessments. The financial health of the association is crucial, as it affects your future costs as an owner.

5. Meeting Minutes: The minutes from recent board meetings provide insight into ongoing issues in the building, such as complaints about maintenance or financial disputes.

6. Reserve Study: This document outlines the long-term capital needs of the association, including the expected costs of major repairs. A well-funded reserve account suggests that the association is financially stable.

What Should You Look for in the Condo Docs?

When reviewing the resale package, it’s important to focus on several key areas to verify the condominium or cooperative is a sound investment:  Even if this purchase is a luxury condo in the DC metro area, you want to make sure that it is on strong financial ground.

1. Financial Health: Carefully review the association’s financial statements. Are there enough reserves set aside for major repairs?

Are there any outstanding debts or financial obligations?

Healthy reserves suggest that the association is well-managed and less likely to impose special assessments for major repairs.

2. Special Assessments: Special assessments are fees levied on owners to cover unexpected expenses, like major repairs or renovations.

If a special assessment has been issued or is planned, factor this into your budget, as it could significantly increase your monthly costs.  You want to read the minutes carefully because there may be discussions of a pending special assessment which is going to be voted on by the community.  Since it hasn’t passed yet, it may not be disclosed as a special assessment, but it may be lurking in the minutes.

3. Pending Litigation: This is a big one! If the association is involved in a lawsuit, it could mean there are underlying issues with building management or maintenance. Litigation can also lead to financial instability and higher fees for unit owners.

4. Rules and Regulations: Make sure you understand and agree with the community rules. For instance, are there restrictions on short-term rentals or renovations? Are pets allowed? Some rules can impact your lifestyle or long-term plans.

Remember, if you are a pet owner or plan to buy a pet in the near future, don’t consider purchasing condos or cooperatives with a no pet policy in place. No matter how cute your pet may be, if it’s a no pets building, you can’t have a pet. Period. 

5. Maintenance Issues: Review the minutes from recent board meetings to identify any recurring complaints or maintenance problems. This can give you a sense of whether the association is responsive to owners’ concerns and proactive about building maintenance.

What Should You Watch For?

1. Underfunded Reserves: An association with low reserves may be unable to cover necessary repairs, leading to special assessments or deferred maintenance. A reserve study will indicate whether there’s enough money set aside for future expenses.

2. Frequent Special Assessments: While occasional assessments are normal, frequent or large ones can signal poor financial management or neglected maintenance.

3. High Delinquency Rates: If a significant number of owners are behind on their association dues, the building may face financial difficulties, which could result in higher fees for all owners.

4. Mismanagement: Pay attention to complaints about poor management in the meeting minutes or financial statements. Mismanagement can lead to deferred maintenance, which could negatively affect property values.

5. Asbestos Violations: Starting in October 2024 new laws went into effect in Maryland regarding asbestos disclosures in condominiums. Buyers should be alert to any disclosure of asbestos violations. Asbestos can pose serious health risks, especially if it has been disturbed without proper remediation.

Do the Condo Docs Discuss Asbestos?

Beginning in 2024, new laws in Maryland require sellers and condominium associations to disclose certain information about asbestos when selling a unit. This law aims to protect buyers by providing information regarding the potential presence of asbestos

Sellers must disclose if they have actual knowledge of the presence of asbestos in the unit. This includes detailing the location of the asbestos and whether any abatement (removal or mitigation) has been performed during their ownership.  The law does not require associations to proactively disclose the presence of asbestos in common areas unless there is a known violation of health or building codes.  Associations must disclose whether asbestos was improperly disturbed and whether this resulted in an uncured violation issued by a local or state authority.

For example, if asbestos was disturbed during a construction project without proper mitigation, the association must inform the buyer if this led to a government-issued violation.

Time Line to Review Condo Docs

The timelines for condo doc review are different depending on whether your property is in DC, Maryland or Virginia.  As a buyer you have lots of latitude to void the contract based on the condo document review, but you have to give notice within the review period.  If you miss the review cutoff, then you have lots your opportunity to void the contract based on the condo docs.

In Washington, DC, the law provides buyers of condominium units with 3 business days to review the resale package after it has been delivered.  The seller must provide the resale package to the buyer within 10 days of receiving a written request for the package. The buyer then has a 3-day review period to review the documents before completing the purchase. If the buyer finds something in the documents that they are not comfortable with, they can void the contract during this review period. For HOA properties, Washington, DC law requires sellers to deliver the governing documents 15 days before settlement, giving buyers time to review the rules and community regulations.

Virginia

In Virginia, buyers of condo units receive 3 calendar days to review the condominium resale package.  This is the shortest of all the local jurisdictions.  The seller must provide this package within 14 days of receiving a written request. The resale package includes important information about the association, such as its rules, financial statements, and bylaws. If buyers are unsatisfied with any of the information, they can cancel the contract within the review period without penalty.  For buyers of properties within HOAs, the law similarly allows for the review of governing documents before completing the purchase.

Maryland gives condo buyers 7 calendar days to review the resale documents. These documents must be delivered before settlement, and buyers have the right to cancel the contract during this period if they find any issues. The seller is responsible for providing these documents, which include key information about the condominium’s governance and financial health.  For properties within an HOA, Maryland law requires the seller to provide the governing documents at least 21 days before settlement, and the buyer has 5 calendar days to review these documents. If the buyer wishes to cancel the contract, they must do so within this timeframe.

If You Are Thinking of Buying a Condo or Coop – Let’s Talk!

I love helping buyers sort out the differences between the numerous condos and coops around the area.  Is a pet friendly building – or a pet free building – important to you? How do you feel about common washers and dryers – in the basement? on the same floor? What about garage parking and gyms? or indoor pools? All these things factor into your decisions and I can help with navigating the selection process.  Let’s talk.  Please reach out to me at 240-401-5577 or email me at lsie@lisehowe.com.  I would love to help!

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