By Robert Meisner
In order to determine whether you are a good candidate for condominium living, you must understand the benefits and the disadvantages of condominium living. Those of us who are involved in the condominium industry will always agree on at least one thing. The biggest problem in the condominium setting is the condominium purchaser who does not know what it’s really like to live in a condominium and lacks a clear understanding of his responsibilities and obligations, as contained in the condominium documents. For some reason, most purchasers do not choose to read the condominium documents and do not secure the assistance of qualified professional advisers who understand and can interpret them; or, if they have done so, they conveniently forget what they have been told!
Is a Condo Right for Me?
Newspaper ads, TV and radio spots, glossy brochures and, perhaps, even your best friends extol the virtues of living in a condominium, either as a primary or secondary residence. Advertising jingles and hype create the illusion of the condominium as “carefree living.” To the contrary, I have discerned over my years of experiences, both as a counselor to and resident of condominiums, that condominium living is more accurately described as “careful living”.
If you are considering buying a condominium unit that you plan to live in as your primary residence, you should be sure that you will enjoy living there. Don’t forget the basics, including whether you can stand to live with someone living directly above or next to you. While you may have the option to rent out the condominium unit, you should assume when you buy that you will be living there for an indefinite period. Given those considerations, it is essential that you understand the dynamics of condominium living generally, and of the condominium project you are considering, specifically.
What type of person is suited to condominium living? Perhaps the easiest way to answer the question is to describe the person who is not suited to condominium living.
A condominium resident must be prepared to give up a portion of the liberties, and the flexibility of lifestyle, he or she may enjoy in a single-family, detached dwelling. If you are not such a person, you may wish to reconsider the condominium as a form of ownership and mode of living.
Condominium living is not for the person who is unwilling to follow rules and regulations that may restrict his personal preferences concerning such matters as the kind of vehicle he may drive, the number of pets he may keep, the parties he may have and the additional persons who may reside with him at the condominium. Condominium living also is not for the person who is unwilling, or lacks the economic means, to spend large sums of money to maintain the exterior appearance of his home.
Do not live in a condominium if you crave wide-open spaces. “Traditional”, or apartment-style, condominiums, in particular, generally are not well-suited to those with dogs who will need to be walked or multiple automobiles that will need to be parked or stored. Condominium living is not for the person who is used to a farm environment or a sprawling, single-family suburban lot.
Conversely, condominium living may be the perfect answer for the person who wants to increase the amount of property and amenities he can afford by reducing his price per square foot; who wishes to delegate to others the obligations of maintenance, repair and replacement of exterior and common areas; who is willing to abide by restrictions, rules and regulations; and who wishes to enhance his social or recreational opportunities at minimum cost. For instance, a retiree may look at a condominium as a place he can live in relative comfort, free of the obligation to care for the yard, plow the snow or worry about the repair of the roof. The condominium also may benefit the family that does not have the money to buy a sprawling residence, but wishes to take advantage of the amenities provided by the condominium project, which may include a clubhouse, pool, exercise room and jogging path.
Before You Sign With the Developer
Every purchaser should have an experienced condominium attorney review the purchase agreement to ensure that the developer has complied with the dictates of the State condominium statute, and to determine whether the purchase agreement is otherwise reasonable, enforceable and properly and clearly sets forth the arrangement that has been struck. At a minimum, a purchase agreement should include the following:
- Number, as shown on the condominium subdivision plan, that corresponds to the Unit you are purchasing;
- Legal description of the condominium project, together with a description of any assigned carports, boat wells, parking spaces, etc.
- Price you are paying;
- Terms for payments of the purchase price;
- Obligation to pay assessments and to make any initial working capital or reserve contribution to the condominium association;
- Cancellation rights of the purchaser (usually limited to the period before the agreement becomes binding);
- Cancellation rights, if any, of the developer;
- Warranty provisions and guarantees, if any; and,
- Provisions governing the rights and responsibilities of the parties in the event of a default by the purchaser or developer.
The Michigan Condominium Act mandates additional provisions that a developer must include in the purchase agreement when selling a residential condominium unit in Michigan. First, the developer must give the purchaser at least nine (9) business days from the date he receives the condominium documents to determine whether he desires to withdraw from the condominium unit purchase. This right to withdraw can be waived by a prospective purchaser, but should never be waived unless the purchaser already is fully acquainted with the condominium project and condominium documents and is certain he wishes to go ahead with his purchase. Additionally, a Michigan condominium purchase agreement must contain provisions for the escrow of deposits and other pre-closing payments, and a notice of the purchaser’s exclusive right to arbitrate certain disputes between the developer and the purchaser or the condominium association.
Incidentally, the purchase agreement used for the sale of a new condominium by a developer may differ substantially from that used in a “resale” situation. In Michigan, for example, a “resale” condominium purchase agreement is not regulated by statutory provisions that relate specifically to condominiums. Nevertheless, good legal practice dictates that a purchase agreement for a resale condominium contain all customary provisions that define and protect the rights and obligations of the purchaser and seller of residential property, generally, together with additional provisions unique to the condominium concept, such as:
- Proration of current condominium association assessments to the condominium unit;
- Responsibility for any special assessments which may be levied;
- Removal of any contingencies which may be contained in the condominium documents, such as a “right of first refusal” of the condominium association or certain co-owners, or any other restraint on alienation which must be waived; and,
- Assurance that the condominium premises are being sold in a proper and workmanlike condition.
Before a new condominium purchase agreement becomes binding, a Michigan developer must provide for a purchaser’s review copies of various additional documents that pertain to the condominium project. The purchaser’s right to withdraw from a purchase agreement does not commence to run until the purchaser receives, and is able to review, this information. Those documents include the:
- Master Deed, Condominium Bylaws and Subdivision Plan;
- Articles of Incorporation and Association Bylaws of the nonprofit condominium association (the Condominium Bylaws and Association Bylaws may be combined);
- Rules and regulations, if any, of the condominium association that may have been promulgated by the developer;
- Disclosure Statement, a plain-English description of the condominium project prepared by the developer (which will be discussed in greater detail later in this book); and,
- Condominium Buyers Handbook, a publication promulgated by the Michigan Department of Labor and Economic Growth that is designed to acquaint readers with the basic aspects of condominium living.
The disclosure statement may be a particularly valuable tool for review by the purchaser and his legal counsel. A developer is required to disclose material information about the development of the condominium project, relevant information concerning the operation of the association and the history and background of the developer. The disclosure statement, which is vaguely akin to a prospectus for a new stock offering, must disclose:
- The nature of the units constructed or proposed;
- How large the condominium project may become;
- How long the developer has to enlarge the condominium;
- Whether recreational facilities have to be constructed, and, if so, under what conditions;
- The identity of the developer and, if the developer is a corporation, limited liability company, partnership, etc., the identity of its principals;
- Whether the developer has had prior experience in developing condominiums and if so, where and when;
- The existence and nature of all pending legal and administrative proceedings against the developer that relate to the project;
- A summary of major restrictions upon the use of units and common elements;
- Whether the roads and sewers of the condominium project will be private or public, and
- Any other “unique and/or material aspects of the condominium project that should be disclosed to prospective purchasers,” such as warranties or their disclaimer.
There usually will be attached to the disclosure statement a proposed budget for the condominium association. Careful scrutiny of the budget frequently may cause the purchaser to conclude that the budget has been understated, or is based upon units in the condominium project that have not yet been, and may never be, established.
The disclosure statement can provide useful insight and information about the developer’s present and future plans for the condominium project. If the developer discloses other condominiums it has developed, or with which it has been affiliated, you or your attorney should inquire of the officers and directors of those associations whether their experiences with the developer have been favorable, or not.
Have you noticed that condominium developers often come up with the most idyllic names for condominium projects? Utopian sounding names, such as “Green Farms,” “Pleasant Acres,” “The Woods,” “Windmill Pointe,” “Highland Lakes” and “Streamwood” are common. So, too, the names of places in England or France, such as “Coventry,” “Stonehenge,” “Londonderry Downs,” “Colonial Village,” “Brittany” and “Le Chateau” convey images of solitude, peacefulness, tranquility and habitability.
For many, condominium living is, indeed, “carefree living,” but it most certainly is not for everyone. Anyone who is interested in buying a condominium should be aware of the practical and legal pitfalls, trials and tribulations of condominium life.