What is a Condominium?
A condominium, or condo, is the form of ownership of real property. When you own a condo in a residentail building, typically you exclusively own your particular unit from the walls in. The ownership of the common elements such as hallways, heating system, elevators, exterior areas, the basement and the roof is jointly owned by all of the unit owners and controlled by the condo association. The condo association is made up of all the unit owners.
The association elects a condo board that governs the association and runs the building. Unit owners typically have voting rights that correspond to their unit ownership. Sometimes is it one vote per unit, other buildings allocate voting based on percentage. The percentage is determined by the square footage of the unit so people with the biggest units have a bigger vote. Sometimes the condo board will hire a management company to assist in running the day-to-day affairs of the condo, like collecting the monthly maintenance fee from the unit owners and doing the banking, paying the utility bills, arranging for cleaning of the hallways and shoveling of snow. The management company should not make major decisions that affect the unit owners – that is the job of the condo board. After all, the board was elected by the unit owners. So major expenditures like deciding to replace the roof or repair the boiler, and financial matters such as whether to increase the maintenance fees, whether to allow pets are all up to the condo board. If there is no management company the board or other unit owners have to take care of everything in their spare time.
Why Does The Condo Association Matter?
When buyers shop for a unit, very often they are very focused on features of the unit itself and don’t pay much attention to the association. It is crucially important for the buyer to recognize that they are not buying just the condo unit. When you purchase a condo, you are also buying into the condo association. A well-run condo association has made provisions so that it has money in the bank for future maintenance and repairs. That is why you, as a unit owner, pay monthly maintenance. Your maintenance is used to build up the reserve fund gradually over time so that when repairs are needed the association has the funds to pay for them. If a condo does not have sufficient reserves, the board will often decide to impose a “special assessment” on the current unit owners. Since most of us like to know what our monthly expenses will be, getting his with a special assessment is not a welcome event. This is especially important in older buildings – and many Hoboken condos are in buildings that were constructed 100 years ago. If a building has not been well maintained over the years, the chances of problems arising are even greater than in a brand new building.
What Is the Hoboken Condo Buyer To Do?
When you are shopping for a condo you should focus on more than just the physical condo unit. While it is your lawyer’s job to find out certain information during the attorney review period, after you’ve made an offer, it’s been accepted, you’ve agreed on a price and hired a lawyer, there is nothing that prevents you from asking some important questions of the seller much earlier in the process while you are still shopping. Some things you might want to know are:
- Does the condo have a reserve fund?
- How much is in it?
- Does the condo board meet on a regular basis?
- Have there been special assessments in the past and for what reason?
- Is the building self managed or has the board hired a management company?
- What major repairs have been made to the building and when?
- Does the association have a budget for ongoing expenses like insurance and utilities?
I’m not suggesting that you put the cart before the horse and demand to see all the condo documents and financial statements before you make an offer (although in New York City that is quite common). There is no reason a seller should object to answering these basic questions. If they do, that just may be a red flag and you might want to consider other options. With so many properties on the market in Hoboken today, there is no need to settle on buying a condo in a mismanaged building or one that is in financial trouble.