THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, July 30, 1994 TAG: 9407290451
SECTION: REAL ESTATE WEEKLY PAGE: 22 EDITION: FINAL
COLUMN: Common Ground
SOURCE: G. Robert Kirkland and Michael A. Inman
LENGTH: Medium: 82 lines
I bought a condominium unit about six months ago. Just recently, I received notice of a $1,000 special assessment for major roof repairs, shelters for cluster mailboxes and various signs.
If I had known about this assessment earlier, I would not have bought the condominium. Paying the assessment will be a great hardship for me.
The board of directors of the condo association is supposed to disclose any expected capital expenditures within the next two fiscal years. Who should have told me about the assessment? Who is responsible for preparing the disclosure statements?
I talked to one of the board members and was told the board had a reserve study done three months ago. After the study revealed the poor condition of the roof, the board decided on the special assessment.
It appears your condo association's board of directors fulfilled its disclosure duty as best it could when you bought the unit six months ago.
Actually, the roof repair is not a capital expenditure. A capital expenditure involves adding something new to the common areas, such as playground equipment or a clubhouse expansion.
From what you've told us, the board had made no decisions on these expenditures when you bought the unit. Thus, it was not possible to tell you about them.
Still, many owners have questions on what constitutes reasonably expected expenses.
For instance, suppose that more than six months ago, the board discussed the possibility of adding signs and mailbox shelters to the complex but had not passed a resolution to find a contractor for the work. Is this still an anticipated capital expenditure?
We believe that an expenditure becomes reasonably anticipated if an expert's report suggests the need for it within the next two to three years - or if the board actually votes for the expenditure.
Clearly, in such cases, there's a requirement to report it to the buyer. In your case, however, the new signs and mailbox shelter were not a reasonably anticipated capital expenditure when you signed the contract.
As for the roof repair, it is curious the board is funding the project with a special assessment. Board members should have made sure their reserve fund had enough money to cover the work.
If an anticipated capital expenditure is not disclosed to the buyer, he or she should not be required to participate in any special assessment needed to raise money for the project.
Every condo buyer should read their resale certificate to know what expenses to expect. As of July 1, the General Assembly requires associations to include a current budget, or a summary, in the resale certificate. This is in addition to a statement of financial condition for the last fiscal year.
Other statements in the resale certificate should:
Include the amount of all assessments and any other fees and charges associated with buying and maintaining a condominium unit.
Report the status and amount of any reserve or replacement fund, as well as any part of the fund designated for specified projects by the board of directors.
Include the nature and status of any pending suit or judgments involving the association.
Set forth what insurance coverage is provided.
Explain that any improvements or alterations the owner makes to the unit must not violate the documents.
Include a copy of the current bylaws, rules and regulations of the association, along with any amendments.
As you can see, the resale certificate contains a lot of valuable information. To review the certificate thoroughly, condo buyers should make sure to get a copy of it soon after signing the contract, or before, if possible. MEMO: G. Robert Kirkland, president of a Virginia Beach property-management
consulting firm, and attorney Michael A. Inman specialize in Virginia
community-association issues and are affiliated with the Southeastern
Virginia chapter of Community Associations Institute. Send comments and
questions to them at Real Estate Weekly, 150 W. Brambleton Ave.,
Norfolk, Va. 23510. To submit questions by phone, call 446-2033; fax:
446-2531.
by CNB