What couples should know before purchasing a condo

Before purchasing a condominium, unmarried couples should enter into a partnership agreement in order to avoid potential disputes down the road. (Steve Geer/Getty )

Q: I am sure you have written about this in the past, but my girlfriend and I plan to buy a condominium later this year. What advice can you give us?

A: The first piece of advice is that the two of you should enter into a partnership agreement before you take title. I wish you all the very best, but things happen and you don’t want to be in a fight later over who gets what, who pays what and what happens if one of you wants out of the relationship or dies.

Before you buy, you must do your homework. It is not the same as buying a single-family home. All condominium associations have rules and regulations that must be honored by all owners; all associations have budgets that may or may not be adequate.

State laws differ as to whether potential buyers are entitled to receive certain information before they go to closing about the activities and operations of the association. In many states, a seller is required to provide potential purchasers with what is known as a “resale package.” If the buyer does not receive the package prior to settlement — or if the buyer does not like what he or she sees in that package — the buyer has the right (within a certain number of days after receiving the information) to cancel the contract and get the deposit refunded.

Here are the basic things you should review before you take title to a condominium unit. Your sales contract should give you the right to obtain the following information, along with the right to terminate the contract should you not like the information. Normally, you should have a minimum of 15 days from the time you receive this information to make your decision.

1. Condominium documents: Most associations have a declaration, bylaws and house rules. Make sure they are current and that the declaration and bylaws have been recorded among the land records in your area. Plats and plans are also important because they identify what is a common element, a unit and a limited common element.

2. Budget: Every year, the condominium association board must prepare a budget for the next year showing potential income and expenses. Additionally, the budget must contain adequate reserves for future repairs and replacements. Insist on receiving the current budget, the proposed budget for next year (if it is available) and last year’s budget.

3. Accountant’s report: On an annual basis, the association obtains (or should obtain) a report from an independent certified public accountant. This report shows the financial picture of the association and includes important comments from the CPA. The comments often detail any concerns the CPA has about the financial health of the association.

At minimum, you should receive and review these documents. It is also smart to periodically visit the condominium — perhaps on a Saturday and Sunday — and talk with owners. Some may be guarded in what they tell you; others may be candid and tell you the good and the bad (if any) of their association.

Finally, consult your real estate attorney before you sign any contract to purchase a condo. This is an important investment, and you want to make sure you fully understand your rights and responsibilities.

Benny Kass is a practicing attorney in Washington, D.C., and in Maryland. He does not provide specific legal or financial advice to any reader. Readers may email him, but he cannot guarantee a personal response.

[e-mail]