In purchasing a condominium unit, one of the most important tasks to complete is a thorough review of the condominium documents. Although it is imperative to read through the bylaws and regulations to ensure that you can live with the rules that the association has in place, something that every property owner should be familiar with is the information in the 22.1 disclosure.
A 22.1 provides a summary of what can otherwise be learned from parsing the meeting minutes and budgets. The disclosure states: the amount of regular assessments (generally, paid monthly) that is owed on the unit being purchased; the amount of special assessment, if any; whether any special assessment is contemplated; any capital expenditures in the last two years; the amount of reserves and whether any of those reserves have been earmarked for certain projects; whether changes to the unit are in compliance with the association’s rules (which they hardly ever attest to); whether a parking and/or storage space is included with the sale and whether there is an additional assessment for these items; and whether the Association is involved in any litigation.
It is crucial that the Buyer have this information to understand the financial state of the association that he/she is buying into. For example, if the reserves are low and there are multiple capital expenditures noted in the coming years, then one should be weary of an increase in the regular assessments or the levy of a special assessment. Potential litigation against the Association can have this same affect, although serious litigation comes about less often.
It is the Seller’s obligation to provide this disclosure, along with all of the other condominium documents, to the Buyer. The Buyer is often times very eager to see these documents after the offer is accepted. It is in the Seller’s best interest as well to obtain these documents and provide them to the Buyer quickly since both the CAR and the 7.0 contracts provide for a five business day approval period. It is not until the end of these five business days that the Seller can rest assured (or a little bit more so) that he/she is one step closer to the closing table.