Buying a Condo: Understanding the HOA
When you make the decision to purchase a condo, you also commit yourself to a relationship with the condo association, sometimes referred to as the homeowners association (HOA). Your ownership in the development automatically makes you (along with other owners) a member.
The condo association is responsible for anything not directly related to the inside of your unit. This includes the common areas in the buildings and on the property, upkeep, maintenance, and insurance for the general property and portions of the building not covered by member condo policies.
Covenants, Conditions, and Restrictions (CC&R)
This is where a lot of new homeowners become confused – and sometimes surprised and upset. The condo association (or homeowners association) actually has quite a bit of control over what you can and can’t do around your unit. While some are more laid back, others are very controlling. They may dictate the color you paint the outside (not usually an issue in a condo), the color of the window fixtures you put up (so the building looks uniform from the outside), and what you can and can’t do to your outside landscaping if you have a yard area of your own.
The good news is that you can get a copy of your condo association’s covenants, conditions, and restrictions before you decide to make a purchase. Do so, and make sure you read them carefully. Question anything you don’t like. Negotiating terms before a purchase might be possible. After? Not so much.
Condo Association Fees
You will end up paying a fee to your condo association – monthly, quarterly, or yearly depending on how yours is set up. This fee will be on top of your mortgage payment and it is also non-negotiable. Condo association fees help to pay for the association’s general property and liability insurance, for maintenance, and for the upkeep of the common areas and recreational facilities. From time to time you may also find yourself billed for your share of things known as capital improvements; for example, a new roof or new sidewalk.
Make sure you read the documents to get a clear understanding of when and how often your condo association can increase fees and for what reasons. Those on a tight budget find condo ownership is not feasible primarily due to the extra fees that may come without warning.
There are a lot of benefits to buying a condo, including added security and less responsibility for maintenance and groundwork; but the drawbacks can be pretty significant, especially financially. Make sure you understand exactly what you are getting into and talk to your real estate agent about all of your options before making a final decision.