Review Condominium Documents Before Buying

Q: You once wrote that the condominium resale certificate a potential buyer must receive should disclose any outstanding assessments. Is a seller required to disclose any large, coming assessments due to known problems in the complex? The documents I received when I bought my unit were outdated and incomplete, but because it was so close to the closing date, I foolishly completed the transaction. How do I determine whether my seller knew of these problems and the pending assessment?

A: What can I tell you? You have already admitted that you foolishly went to settlement without doing your homework.

In many jurisdictions, including Maryland, Virginia and the District, potential condominium buyers are entitled to receive a resale certificate. This is a document that spells out a number of important aspects of the condominium you are planning to purchase, such as the amount of reserves in the association and whether there is any pending litigation against the complex.

This certificate should also contain the current legal documents of the association, the budget and an audited statement from the association's independent accountant.

It will also advise a potential buyer whether there are any special assessments to be paid.

When there are such assessments, my experience has been that buyers and sellers will negotiate who will pay them. When an agreement is reached, it will be included in the purchase and sales contract. Typically, a seller will agree to make the payment, but that is not always the case. Some sellers take the position that they will not pay the balance of the special assessment because it will benefit only the new buyer.

But your situation is different. When you received the resale certificate, no formal assessment had been imposed by the board. It was in the planning stage.

You had the opportunity to do your homework, but unfortunately you were in too much of a hurry to close. You should have requested updated copies of the financial documents, and you should have discussed the status of the condominium with one or two board members as well as the association's property manager.

I am sure your unit was a significant investment for you. Yet you opted to ignore the warning signs, and you failed to exercise the right provided you by law -- namely, the right to receive and review the financial state of affairs for that association.

But even if you did carefully examine this information, at the time you signed your sales contract no such assessment was in effect; it was only a possibility, not a reality.

What if you determine that your seller knew about the coming assessment? Does that make him legally obligated to disclose this to you? Under the legal disclosure requirements, the seller must disclose known conditions about the unit you are considering, not the entire complex. The burden for disclosing common-element issues rests with the association, not the individual unit owners.

Did you ask the seller if there were any special assessments pending? If so -- and if the seller knew about those issues and lied to you -- that would change my opinion as to his potential liability. But proving knowledge will not be easy. Obviously, if the seller was a member of the board of directors when you signed the sales contract, that might make a difference.

Unfortunately, too many condominium owners do not take the time to educate themselves about the operation of their complex. Too often, the only time owners complain is when their monthly condo fees increase or when there is a special assessment levied by the board.

It is a mystery to me why potential condominium buyers spend more time deciding which computer or cellphone to buy than they do researching the home in which they plan to live.

Legislatures have given us tools with which to make educated decisions; home buyers should make full use of those tools.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed, stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.