Washington State Condominiums And Condo Sales

The new choice in housing

The era of condominiums has arrived. From the multi-million dollar downtown penthouse to the new construction taking place in suburban areas from Everett to Olympia, condominium ownership has soared in recent years as buyers have taken advantage of the lucrative and unique opportunities in the Northwest condominium market. Features such as spacious floor plans, central location and convenient amenities have caused buyers to flock to condominiums.

Whether you are first-time buyer or desire to downsize into low maintenance, centrally-located living, condominium living is fast becoming the preferred residence for buyers of every age. This demand has resulted in historic price appreciation and unprecedented migration from the traditional single family home to the condominium.

To assist you in gaining a better understanding of the unique challenges faced by a condominium seller/buyer, we have provided some helpful information and insight below:

Condominium ownership
Owning a condominium is quite different than traditional home ownership. Because a condominium features amenities utilized by all owners, each individual owner maintains ownership and financial obligations related to areas outside of an individual unit.

Owners acquire three separate components when purchasing a condominium:

• Units. This is the actual space where you reside. Units also include an exterior deck and all fixtures and amenities located inside the living area. The condominium units will be shown on the developer’s plat and plans and are defined in area by the condominium declaration.
  
  
• Limited common elements. These are common elements that are reserved for use by usually one but sometimes more of the condominium unit owners. Limited common elements may include balconies, decks, storage areas and parking spaces. The declaration will define limited common elements and the plats should show where they are located.
  
  
• General common elements. These are portions of the property used by all the unit owners. Everything that is not a unit or a limited common element is a general common element. For example, in most condominiums the general common elements include, in addition to the land, such items as foundations, roofs, slabs, perimeter walls, boiler rooms, corridors, laundry rooms, common stairs, building lobby, trash areas, utility rooms and water mains. General common elements also include swimming pools, workout areas, rooftop decks and other areas where all unit owners have the right to access.

The condominium association
The day-to-day operation of a condominium is governed by the unit owners. A group of owners commonly referred to as a condominium, community or homeowner’s association is responsible for enforcing condominium restrictions, bylaws, covenants; making decisions regarding repairs, maintenance and additions; and to collect monthly assessments and assess special assessments. This group of owners is elected by the unit owners and is usually referred to as a “Board of Directors”.

The association provides for a system of self-governance whereby residents elect one another to serve on a “Board of Directors”and on various committees for the betterment of the condominium community. The association establishes rules and determines when to take certain actions, such as repairs, improvements and additions. Membership in the association is not optional and becomes automatic when purchasing a unit and terminates when the unit is sold.

Assessments
Based on the common ownership of the condominium’s limited and general common areas, the unit owners (as a whole) are all responsible to pay for the maintenance, repair and additions to the condominium’s common areas. Repair and maintenance expenses are paid by the unit owners through monthly and special assessments. The amount of the assessment depends on the cost of the repairs and the financial strength of the condominium association.

For your protection, disclosures regarding the financial and physical condition of the condominium must be provided to you before you buy. The disclosures contained in these documents may reveal insufficient association reserves and/or the need for substantial repair expenses that will equate to significant assessments levied against you after your purchase.

Document review
To ensure that you understand the financial strength (or weakness) of your condominium and to gain insight on what to expect after you purchase your condominium , we advise all condominium buyers to conduct a comprehensive review of the various documents and disclosures maintained by the condominium association before purchasing. Documents available for review include:

1. Public Offering Statement. For new construction and conversions, the public offering statement (“POS”) is a document containing information regarding the developer, unit and common area restrictions, warranties, expected assessments and other information related to the condominium. It is drafted by the condominium developer, and is required (under Washington law) to be provided to all new (and converted) condominium buyers before conveyance. Among other disclosures, the POS includes a list of the developer’s five most recent condominium developments, developer warranties, and a list of common amenities and assessments. For a complete list of POS disclosures, please visit: http://apps.leg.wa.gov/rcw/default.aspx?cite=64.34.410.
   
   
2. Bylaws. The bylaws provide for meetings and voting, the manner in which the condominium budget should be prepared, the determination and handling of assessments, the filing of assessment liens, the nature of insurance coverage, and restrictions on the use of the units and the common elements. The bylaws also provide that the board of directors of the association has the power to establish rules and regulations governing the use of the condominium. Boards of directors usually will adopt rules and regulations that cover matters that either are not contained in the bylaws (such as how and where to store bicycles), or that need further amplification. For example, the bylaws may allow pets. The board can enact a rule spelling out the rights and responsibilities of pet owners.
   
   
3. Covenants, conditions and restrictions. The CC&R’s provide the rules for the operation of the condominium itself. Quiet hours, parking, pet restrictions and common area rules are set forth in the CC&R’s. The CC&R’s also contain the applicable fines levied against unit owners for violations.
   
   
4. Condominium Declaration. The declaration describes such matters as the boundaries of the units, the items and areas that will make up the common elements, including limited common elements, if any, and a determination of the unit owner's percentage interest in the common elements. The Declaration is useful for site maps and descriptions of common areas and the different types of units available in the condominium.
   
   
5. Association Agendas and Minutes. The association agenda is the agenda of matters set to be discussed at a condominium association meeting. The minutes are the recorded notes from association meetings. From these minutes, you can uncover owner complaints and gain a unique insight into needed repairs and financial matters related to the condominium. It is recommended that you review a minimum of 24 months of agendas and minutes.
   
   
6. Reserve Study. The reserve study is a document that sets forth the financial reserve maintained by the condominium association. The reserve pays for future expected costs involving building repairs, maintenance and other expenses. In the event the reserve is insufficient to cover such financial expectancies, a special assessment is levied against all unit owners in an amount sufficient to cover such costs. If there is no reserve study (it is not required), buyers should use caution in moving forward with a purchase.
   
   
7. Resale Certificate. The resale certificate is prepared by the condominium association and provided to a condominium buyer before closing. The resale certificate sets forth a wide variety of information including:
   • Resale restrictions;
   • Recurring monthly assessments;
   • Special assessments;
   • Anticipated repairs or necessary improvements to your unit or the condominium building;
   • Pending lawsuits;
   • Civil judgments;
   • Building code violations;
   • Land use and zoning;
   • Warranty
     
     
8. Special Assessments. Special assessments are levied against all unit owners in the event the Homeowner’s Association reserve account is insufficient to pay for repairs or maintenance. A careful review of the condominium’s history of special assessments can provide you unique insight into the homeowner’s association’s management of the condominium. A well-managed condominium will likely have very few special assessments. A history of assessments may be requested from the homeowner’s association.

By conducting a careful review of these documents, you can save thousands in assessments by avoiding a condominium with a weak financial condition or one that is going to require major repairs. We also recommend that you seek the assistance of an attorney to explain the legal ramifications of these documents.

Here are some other ideas to consider before purchasing a condominium:

• Get an inspection. Obtain a comprehensive condominium inspection on your unit and the common areas. The inspection should be performed by an experienced inspector. An inspection will provide you with further information regarding potential problems and the associated costs related to your condominium purchase. Common (and expensive) problems associated with pre-built condominiums include water intrusion, roofing and siding problems, dry-rot and common area defects.
  
  
• Visit your unit. One of the biggest complaints of condominium owners is noise. Both neighbor and neighborhood noise can seriously affect your enjoyment of your unit. Although most condominiums are constructed with concrete and steel, it is important to visit your desired unit at various times during the day and night. This allows you to gauge neighbor noise levels as well as to observe car and foot traffic. Moreover, we recommend you meet and speak to unit owners and residents in the condominium to get a feel for your future neighbors prior to making an offer.
  
  
• Review insurance policies and claims. By reviewing condominium insurance policies you can determine what is and what is not covered by the policy. In today’s age of condominium defect lawsuits, insurance companies are undertaking an aggressive practice of excluding various defects from coverage. We recommend you not only review the insurance policies but also review pending insurance claims. If an association has made a claim and is corresponding with the insurance company, you will want to review all documentation related to the claim. The potential of an insurance company denying a claim for repairs may result in a substantial assessment against the condominium owners.

A short note on water intrusion
The single biggest liability faced by a condominium owner (and association) is water intrusion. While water intrusion is capable of remediation, the mold and other residual effects remaining after corrective action has been taken can cost a homeowner’s association hundreds of thousands of dollars. Mold is often not visible and can be present behind walls, under floors or in ventilation systems and can result in residents experiencing debilitating headaches, severe allergic reactions, fatigue, respiratory dysfunction, nosebleeds, and liver damage.

Therefore, to protect against water intrusion liability we recommend you obtain a mold inspection prior to purchasing any condominium other than new construction. The mold inspection should be included as a sale contingency in your offer to purchase a condominium. The mold inspection should include: the review and evaluation of water intrusion history and complaints; air sample analysis; as well as the swabbing and microscopic inspection of samples taken from different areas throughout the unit.

To further protect yourself, we recommend you purchase insurance to pay for any future water intrusion expenses. Consult your insurance representative to ensure that water intrusion protection is included in your homeowner’s policy.

Questions
We welcome your questions regarding the purchase or sale of a condominium. Please feel free to contact us by telephone at: (206) 909-8777; (toll-free: 1-800-206-6612) or by email at: info@navigationre.com.