Buying a Townhome or Condo — What are the Contractual Issues?

Townhomes and condominiums are becoming more and more popular in Southern California because of the extremely expensive price of our land.  Land is so expensive here that it usually makes more economic sense from a developer’s point of view, where zoning allows for it, to put more than one housing unit on a particular parcel of land.

What we know as townhomes and condominiums  are both legally called condominiums, but in our area we have generally evolved into using the vernacular terms condominium to mean a single level unit, similar to an apartment unit, in a large building where there are usually units above, below and on each side of the unit, and townhome to mean a multi-story unit.  Townhomes can be either attached, which share some common walls, or the more popular detached, which look and feel very much like single-family homes.  Detached townhomes sometimes are as large as 4000 square feet!

One thing that sets the purchase of any common interest property apart from a Single-Family Residence (SFR) purchase is the Home Owners Association (HOA) and its’ associated fees, rules, bylaws, etc.  All planned unit development properties must have home owners associations and they must have regular meetings, elect officers, have a budget, keep financial records, and generally take care of the common business of the property.

In a small two unit property, this can consist of Owner A and Owner B having a beer together once a year and agreeing to pay for the gardener each month and paint the fence this year.   However, in a large complex, these meetings can become quite political, which can be quite upsetting for the individualists among us.  The bylaws of the association determine things like what kind of pets (if any) people can have, where cars can be parked, what colors people can paint , where you can hang your laundry, sometimes even what kind of window coverings face outwards.   When buying into such a complex, be sure to read the rules carefully to be sure you can abide by them — saying “I didn’t know” is not an excuse, and the association does have the right to impose penalties and to force you legally to comply with the rules of the HOA.

HOA fees can also vary widely.  Although these fees generally cover the fire insurance that you would otherwise pay as an SFR homeowner and often cover things like water and trash, they typically do not cover insurance for your personal property inside your unit — be sure to get clarification on this and get a separate policy similar to renters insurance if needed.  Typically, complexes with pools, while lovely, will have much higher monthly HOA fees because of the increased liability insurance that the HOA must carry due to the risk of someone drowning.  .If you are not really going to use the pool much, it might be better to keep looking for another unit in a complex without these amenities.

Another item to investigate when buying into a planned unit development is the cash reserves and past minutes of the association.  Do the minutes keep mentioning the need for a new roof but the cash reserves are pitifully low?  You can bet that there will be a special assessment to each unit and you, as the new Buyer, will be expected to cough up a big chunk of change.  Use these facts to negotiate and be sure that the Sellers pay their fair share as a credit towards the upcoming roof repair.  The minutes can also help tell you whether this association is well run and friendly or fractious and argumentative.  If all the minutes show things like “Mr. Z was again chastized for failing to pick up his newspaper by 5:30 p.m.” you might want to reconsider if this is the place for you!

For more information on townhomes/condominiums or any other area of real estate, please don’t hesitate to call me at 310-418-5353!