Condo association documents tell prospective buyers everything they need to know. These documents can make or break someone’s decision to purchase a unit within the condo community. Boards should do their part to ensure these documents truly reflect the association’s condition and provide them to sellers within the given timeframe.
What are Condo Association Documents?
Condo association documents are essentially made up of key records that depict the community’s operational and financial status. They set forth the standards, obligations, and rights of both the association and its members.
In Illinois, the Condominium Property Act (765 ILCS 605/22.1) requires associations to furnish copies of certain documents to prospective buyers. This will give them a look into the neighborhood and how it works. Reviewing these documents before committing to a purchase allows them to make a more informed decision.
Condominium Association Documents to Review
Before buying a condo, it is crucial to review condo documents carefully. This ensures that buyers have a clear understanding of the association, its rules, and overall financial health.
Unit owners become part of the community. This means abiding by the governing documents and agreeing to pay certain fees. A thorough review of the condo documents keeps buyers from jumping into a sale with incomplete information.
According to 765 ILCS 605/22.1, the Chicago condo association documents that prospective buyers must receive include the following:
1. Declaration of Covenants, Conditions, and Restrictions (CC&Rs)
Condo declarations outline the rules, restrictions, and responsibilities of condo owners within the association. It is important to pay attention to any restrictions on renovations, pet policies, and other provisions that may impact the lifestyle of the buyer. Regulations may also interfere with investment plans, as rental restrictions are commonplace.
Violation of the rules can result in several potential penalties. The CC&Rs should also clearly outline what owners stand to face in consequences if they breach any provisions.
2. Bylaws
The bylaws for condos govern the operation and management of the community. Buyers should look for information on board elections, decision-making processes, and meeting requirements.
3. Rules and Resolutions
Condo association rules and regulations expound on the more general provisions found in the CC&Rs. These rules are typically passed or amended through board resolutions, which only require majority approval from the condo board.
Reviewing the rules will allow buyers to determine if their lifestyles match the neighborhood. For example, a smoker may not want to live in a condo association that strictly prohibits or controls smoking in common areas.
4. Account Statements
The unit up for sale may not have a clear record. Condo boards must provide prospective buyers with account statements showing any money the seller/current owner owes, including any unpaid dues or assessments, fines, and other authorized charges. The statement must also show if there are any liens against the unit.
As the buyer may be responsible for settling these financial obligations, it is important to be transparent.
5. Budget and Financial Statements
It is also a good idea to review the association’s budget and most recent financial statements. This will help buyers assess the financial health of the condominium.
Buyers should look for any significant increases in dues, outstanding debts, or pending special assessments. These will likely impact their future expenses and household budget.
6. Reserve Summaries
It is equally important to understand how the association manages its reserves. In Illinois, condominiums are required to fund reserves. Boards must show how much money is currently in the reserve fund and whether any of that money has already been set aside for a specific project.
Additionally, it helps to review the most recent reserve study. Reserve summaries and studies tell buyers if the condo is headed for a large special assessment or a sudden spike in dues soon.
7. Unit Alterations
Associations must also provide information on unit alterations. This includes whether the seller believes any changes or improvements made to the unit or its limited common elements comply with the governing documents.
8. Upcoming Major Projects
Buyers have a right to know about any large capital improvements the association expects within the current or next two fiscal years. Knowing this information will help the buyer plan for future expenses.
9. Meeting Minutes
Examining the meeting minutes provides insights into recent discussions, decisions, and any ongoing disputes or concerns within the association. Buyers must pay attention to issues related to maintenance, major repairs, or disputes among owners.
10. Insurance Policies
Another disclosure requirement is what insurance the association provides for unit owners. This includes liability coverage, property coverage, and any special assessments or deductibles that may be applicable in case of damage or loss.
11. Pending Lawsuits
If the association is involved in any lawsuits or has any judgments against it, the prospective buyer must know about them. Being embroiled in legal issues can result in large expenses for the association, which will impact the finances of unit owners.
12. Association Contacts
Finally, condo disclosure documents must provide the name and mailing address of the association’s principal officer or designated contact person. This makes it easier for the buyer to get in touch with the appropriate persons.
Who Provides Condo Association Documents in a Resale?
According to the Illinois Condominium Property Act (765 ILCS 605/22.1), associations must provide disclosure documents upon unit resales. This condo document package must be obtained by the seller before the sale. The seller can then make these available to the prospective buyer if they request it.
Condo boards have 10 business days to provide this information once it receives a written request. Failure to comply with this request within the given timeframe can result in legal problems and penalties.
Can a Condo Charge a Fee for Resale Packages?
Yes, the condo association can charge a fee for providing condo resale documents, as per the Illinois Condominium Property Act (765 ILCS 605/22.1). That said, this fee must be reasonable and cover the cost of preparing and copying these documents. The fee may not exceed $375 (subject to annual inflation adjustments).
Moreover, sellers may put in a rush service request (completed within 72 hours) to the association. In that case, the condo may charge an additional $100.
Putting the Best Foot Forward
Before buying a condo in Chicago, buyers must do their due diligence and carefully review the condo association documents. This will help them make an informed decision and ensure that the condo aligns with their needs, financial situation, and long-term plans. Condo associations, on the other hand, can continue to attract buyers through effective and successful operations.
First Community Management provides expert HOA, condo, and co-op management services to communities in Chicago. Call us today at (312) 829 8900 or contact us online to learn more!
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