Help reviewing condo documents.

I'm in FL. I have an "HOA" but it operates like a condo association. I have a fee simple title to my townhouse and own the dirt under it so it is not a condo but the HOA maintains the building shell, paving, landscaping, and insurance as would a true condo.
I noticed that term in our documents. I’m not sure what fee simple means and I’m pretty sure I don’t own the dirt under it. I’ll be putting in a call to our attorney to discuss this as it applies to our situation.
 
I would check:

1) how often can an owner rent out their unit?
2) is there a limit on the % of units that can be owned by investors (I.e. only set up as rentals)
3) what percent of the owners is required to amend your covenants? Our percentage is set so high that we have been unable to amend our covenants to allow more restrictions on rentals. This is leading to our community slowing becoming more and more investors with renters who have less committment to keeping the community looking great. :(
In reading the documents, the only restriction I saw was that they can only be rented for 6 months or more - so no short term rentals. I made a note to ask how many rentals exist. They have to be recorded with the association, so this should be known. Not sure, but I don’t think there’s any specific limit on the number.

The percentage to amend is 2/3’s. Some things can be passed with a majority but deed amendments require the higher percentage.
 
I'm in FL. I have an "HOA" but it operates like a condo association. I have a fee simple title to my townhouse and own the dirt under it so it is not a condo but the HOA maintains the building shell, paving, landscaping, and insurance as would a true condo. The masonry "party walls" between units are the joint responsibility of the shared owners but would be very odd to have an issue with them. It is complicated but fortunately our property is pretty simple. Roofing and painting are the big structural items and paving/stormwater management are the other potential issues. I like that I'm fee simple so I can't have my community converted by an investor -especially in a high demand area. (13 story tower about to be built next door on the same block). ...
Yes, I've heard of those but didn't mention them because they are unusual. We have friends that live in a setup like that.
 
In reading the documents, the only restriction I saw was that they can only be rented for 6 months or more - so no short term rentals. I made a note to ask how many rentals exist. They have to be recorded with the association, so this should be known. Not sure, but I don’t think there’s any specific limit on the number.

The percentage to amend is 2/3’s. Some things can be passed with a majority but deed amendments require the higher percentage.

Our rentals have a six month minimum, too. I thought that would be sufficient but the percentage of rentals has increased to around 45% of units now. It's not good.

We have more problems now with renters leaving garbage out on the street because they don't arrange bulk pickup, inviting too many people to the pool for a rowdy party and/or propping the pool gate open, parking on the grass or sidewalk because they have too many cars for their unit, etc., etc.

We live in a townhouse HOA so you likely wouldn't face the trash and parking issues like we do.

So we'd like to have a limit on the % of rentals, but we need 75% to change the covenants. We tried to pass it and it failed.
 
This may vary by state, but if rentals reach a certain percentage, lenders will consider a building or complex as seasonal and loans are harder to get which can be an issue for resale. You want an HOA that caps rentals.
 
My policy has a assessment clause that covers special assessments that might arise due to fire or other insurable damage. It does not cover normal wear and tear items like a worn out roof.
 
Our campground (owned by shareholders) is 50 years old and we are exploring the need for a reserve study. We have savings but it is not identified as "reserve" for pool or roof.
We are interviewing a local engineering firm later this month.
Can anyone suggest questions that may not occur to us ?
(you don't know what you don't know)
 
Another former Treasurer here. You have a good set of recommendations.
* Two years of meeting minutes & annual financial statements presented at the annual meeting - you can specify this in your Purchase & Sale Agreement - or ask to see them now.
* Ask about any planned special assessments - you may not get a direct answer because the HOA may have a plan for maintaining the complex but not a budget that has a schedule of multi-year special assessment payments.
* Ask about how much the monthly assessment (commonly called dues) is directed to reserves for future projects - your mortgage underwriter will want to know this. Ideally the percentage should be close to 50%. Half for normal regular operations and small item maintenance, half for future large projects.
* A copy of the last audited financial statement. Did the CPA conclude that the dues were adequate? Any concerns about owners in arrears? Did the CPA measure adequacy of reserves, and did they have any recommendations or comments?
* Bylaws are fine but may not include 'house rules.' Is there a separate document that sets expectations about dogs on leash, parking in driveways overnight, hours of quiet time? Is there a separate fee schedule you need to be aware of? Generally these are for occasions when house rules have been violated.
* Reserve study - check with your state Attorney General regarding the legal requirements to have one. Also ask for a copy so you can see what the reserves cover and if that is adequate in your opinion.

- Rita
 
* Bylaws are fine but may not include 'house rules.' Is there a separate document that sets expectations about dogs on leash, parking in driveways overnight, hours of quiet time? Is there a separate fee schedule you need to be aware of? Generally these are for occasions when house rules have been violated.

- Rita
Thanks for the information. Re: "House Rules", yes, they did provide a document like that. It was a very good summary of the basic day to day rules. Having a pick up truck, I was glad to see that there is no requirement to park my truck in the garage. I may try to do that but I think it will be a tight fit. I may, in time, get a different vehicle. I'd like to have both of my vehicles in the garage.
 
...* A copy of the last audited financial statement. Did the CPA conclude that the dues were adequate? Any concerns about owners in arrears? Did the CPA measure adequacy of reserves, and did they have any recommendations or comments? ...
Retired CPA here. A CPA would NEVER opine on the adequacy of dues or the adequacy of reserves. That's just not what they do. They will only opine on whether the financial statements are fairly presented in accordance with generally accepted accounting principles. And generally accepted accounting principles will not address the adequacy of due or the adequacy of reserves.

... * Reserve study - check with your state Attorney General regarding the legal requirements to have one. Also ask for a copy so you can see what the reserves cover and if that is adequate in your opinion. ...
In Florida, reserve studies were not required in the past. however, after the Champlain Towers South collapse, they enacted a requirement for reserve studies for structural integrity components for buildings 3 stories or higher every 10 years. Michigan does not require reserve studies.
 
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This may vary by state, but if rentals reach a certain percentage, lenders will consider a building or complex as seasonal and loans are harder to get which can be an issue for resale. You want an HOA that caps rentals.
The percentage of renters can be a big deal. Three almost four years ago I worked hard on this for our complex built around 1993 as our rentals were not capped. It is true if the complex is near or over 50% rentals, it may not be accredited for FHA mortgages. In our area with a lot of military this was a big deal. After months of working on the legalese and after another month of making phone calls, getting proxy votes once sent out to homeowners, etc. to obtain the 2/3rds majority vote, we managed to pass the Declaration and By-law Amendment that capped our rentals at 20%. In order to get these votes, we had to grandfather in all current owners. It was the only way and a couple of other efforts with prior HOA boards had failed. After the amendment passed, we paid to have someone poll all owners and s it turned out we were at only 27% to begin with even though we had been led to believe we were close to 50%. All good though. With the sale of several units since I am sure we are either close or under the 20%. Second homeowners that do not rent is our largest percentage of ownership.

We are required to do a Reserve Study every 5 years in Virginia.
 
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Thanks for the information. Re: "House Rules", yes, they did provide a document like that. It was a very good summary of the basic day to day rules. Having a pick up truck, I was glad to see that there is no requirement to park my truck in the garage. I may try to do that but I think it will be a tight fit. I may, in time, get a different vehicle. I'd like to have both of my vehicles in the garage.
We call them "Rules and Regs". Our By-laws grant the authority to the BOD to create "Rules and Regs" such that they are as legal and binding as By-laws. Check to see if your By-laws do the same.
 
+1 The Board made Rules and Regulations which were more detailed than the Declarations. When we amended the Declarations at one point some of the then current rules and regulations were incorporated in the amended Declarations.
 
ETA: I'd rather have the party walls extending above the roofline and have simpler HOA for trash and shared property maintenance only. It's the one thing I don't like about my place and the only reason I'd consider selling -mostly because we are a very small community so it's hard/impossible to get anyone to serve on the board and/or do anything.
I've seen the party wall extend through the roof in some older townhouses, but it doesn't seem to be current practice. While it produces two long seams that have to be flashed, I would believe that it is worthwhile for fire prevention.
 
Our condo buildings had firewalls that were extension of common walls to the roof... but only for every other unit. Since I was an end unit the firewall in the attic was on the far side of the neighboring unit that I shared a common wall with.
 
I noticed that term in our documents. I’m not sure what fee simple means and I’m pretty sure I don’t own the dirt under it. I’ll be putting in a call to our attorney to discuss this as it applies to our situation.
FEE SIMPLE is a big deal in the Islands. It means you own the land rather than lease it. My condo is fee simple but I only own my % of the whole average - not under my unit - since I'm on the 15th floor (real difficult to w*rk that out).
 
I'm looking at buying a condo. Everyone says, read all the association documents. I just received them and have a few questions. First, in the bylaws, etc, (the rules), what do you look for. I'm focusing on the section that discusses the things that I own and am responsible for verses the things the association takes care of. Any other critical areas?

Second, I'm looking at the financial statements. They do have a reserve of just over a million, but how do I evaluate that? There's at least a couple hundred units and I'm sure a $1M would go quick if something happened that wasn't covered by insurance, so is there a basis to evaluate the reserve on. Something like a ratio of reserve to total monthly dues? I'm just thinking the $1M in and of itself isn't really meaningful other than, they're not broke.

This is a screen shot of the complex. It's made up of mostly 4 plexes and there is a street of duplexes in the middle.

View attachment 55530
I've worked on modeling our reserve fund for 30 year period, including working with annual Reserve Fund audit professionals (as required by law here in WA state). As a rule of thumb, audit professionals recommended a minimum of 70% ratio (fund $$ balance divided by total asset values (components to be maintained or replaced); in a pinch (non-insured emergency) we could likely obtain a bank loan. But they always include disclaimers in the annual audit making clear they recommend 100% is the ideal (but most HOAs don't reach the ideal in an effort to keep monthly fees down). The most expensive flaws we found in our reserve fund were missing assets the HOA is responsible for (per gov docs). For instance, an expensive item missing were repairing/replacing trip/fall hazards involving cement work (sidewalks owned by HOA, not the city) and vinyl siding replacements. I'd say, review the CC&Rs carefully for reasonableness; clarify how monthly fees are calculated and whether there is a cap related to CPI; check financial statements to understand current and longer term liabilities (is the HOA in debt for past issues); review past 2 years annual reports to members; request the current asset components included in Reserve Fund, make sure all items are present and timed appropriately (roof replacements in my state are every 20 yrs for shingles, the reserve should be collecting for 1/20th every year for replacement costs (watch for stretching useful life beyond reason). Request the 'detailed versions' for Reserve Fund Reports past two years. There are a lot of online resources to help think this effort through. If the Reserve Fund gets into trouble, a special assessment (sometimes large) could end up in your lap -- you would have no recourse against prior owner to share the burden, and it's very difficult to win a lawsuit against an HOA in court. Whatever information/reports you need won't be available from escrow, but the condo seller is entitled to get all this info for your review (don't try to get it directly from HOA or their property managers, get the current info from property seller or their agent). Good luck!
 
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I don't know about our reserves as far as being specific. I do know that we have reserves for some specific items (such as elevator and pool). After 15 years, I've found our board to be pretty open and up front about everything, so I've developed a fair amount of trust in them.

One thing to be aware when thinking about increasing reserves: Each owner "owns" their share of those reserves. The practical significance of that fact is debatable but needs to be considered.

You apparently know your Board members, and I know mine. My advice: be careful to trust but verify, making certain you have valid reasons for that trust. In my HOA experience, which is extensive, most HOA Board members know little about what they're responsible for doing. Most often, it's whomever can be convinced to take on the duties is a gift and readily accepted, no matter their skills for doing the job adequately , or sometimes doing the job at all. Our HOA lost a very large amount from our operating fund due to employee theft that went undetected for years (over 6 figures). And our insurance did not cover that theft. So no surprise, the homeowners are on the hook. Moral of the story is, our Board of Directors are open and sharing, including problems, all too often problems they should have been managing to avoid.

There is a widely recognized lack of competence for most HOA Board members for adequately fulfilling their responsibilities (unpaid volunteers mostly).
 
Thanks everyone. I just got done reading all the documents I was given and I think they're lacking. They answered a lot of my questions, but not the detain mentioned here - specifically the reserve study or a plan of future expenditures versus reserves. I also saw an amendment requiring an audited financial statement and all I was provided was a print out of an internal balance sheet. Worse, printed in January 2025 and dated November 2024. Going to have to call out the seller on that one for not providing the documents needed in a timely manner based on the selling agreement. More work to do. :)
I'm not surprised what you received is inadequate. Over 4 years, as Director, Treasurer, and Reserve fund chair, I had one buyer asked for the Reserve Fund report (out of about 10 properties changing hands each year, so roughly out of 40 buyers, only 1 asked for Reserve Fund reports. And even that report lacked sufficient detail to truly evaluate the fund's health. And I never had a buyer ask for current financial statements, not just the balance sheet. You need the past year's operating statements to understand where the money is being spent, and how well the budget projected those expenses, and you need more than the balance sheet, make sure you get the full financial statements (ideally 2 sets, one for each of the past two years, like 12/2023 and 12/2024).
 
I've worked on modeling our reserve fund for 30 year period, including working with annual Reserve Fund audit professionals (as required by law here in WA state). As a rule of thumb, audit professionals recommended a minimum of 70% ratio (fund $$ balance divided by total asset values (components to be maintained or replaced); in a pinch (non-insured emergency) we could likely obtain a bank loan. But they always include disclaimers in the annual audit making clear they recommend 100% is the ideal (but most HOAs don't reach the ideal in an effort to keep monthly fees down). The most expensive flaws we found in our reserve fund were missing assets the HOA is responsible for (per gov docs). For instance, an expensive item missing were repairing/replacing trip/fall hazards involving cement work (sidewalks owned by HOA, not the city) and vinyl siding replacements. I'd say, review the CC&Rs carefully for reasonableness; clarify how monthly fees are calculated and whether there is a cap related to CPI; check financial statements to understand current and longer term liabilities (is the HOA in debt for past issues); review past 2 years annual reports to members; request the current asset components included in Reserve Fund, make sure all items are present and timed appropriately (roof replacements in my state are every 20 yrs for shingles, the reserve should be collecting for 1/20th every year for replacement costs (watch for stretching useful life beyond reason). Request the 'detailed versions' for Reserve Fund Reports past two years. There are a lot of online resources to help think this effort through. If the Reserve Fund gets into trouble, a special assessment (sometimes large) could end up in your lap -- you would have no recourse against prior owner to share the burden, and it's very difficult to win a lawsuit against an HOA in court. Whatever information/reports you need won't be available from escrow, but the condo seller is entitled to get all this info for your review (don't try to get it directly from HOA or their property managers, get the current info from property seller or their agent). Good luck!
For clarification by way of example: a roof has a useful life of 20 years, the current replacement cost of this roof is $12,000. The reserve fund should be collecting 1/20th of $12,000 annually. At any point in time, the reserve fund should have 1/20 x the roofs age ("consumed portion" of roof). Therefore, a roof last replaced in the year 2000, would be 9 years old in 2009. In 2009, the reserve fund should be holding 1/20 x cost x 9 = to be held in the reserve fund (and typically invested in bank CDs or gov bonds, something bullet proof). If I'm studying that reserve fund, I want to see the "roof replacements" line item at 1/20 x $12,000 = $600 x 9 = $5,400 in the reserve fund account. For simplification purposes, I have not future-valued the $12,000, but reserve funds do, so each year an inflation figure (typically matching the federal governments calculation of annual CPI (our fund currently uses 2.8% annually compounded so that your always dealing with the most current marketplace costs. Again, using this example, if $5,400 is in the reserve fund, your reserve fund coverage is 100% for this line item. All items so evaluated, added together form the 'Reserve Fund Ratio". According to most auditors we've used, 70% is the minimum they consider reasonably healthy funds, but ideally the fund as a whole is 100% "funded" (which applies to the sum of "consumed portions", not the full 20 year replacement cost, that is not until it reaches the replacement year).
 
Wow. No one that I know took out insurance for only their personal belongings as you suggest. My policy covered not only belongings but also everything in the unit. My coverage limit was intended to cover replacing everything in the unit.

Where there is a question on coverage, my insurer and the association insurer would figure out who is responsible for what.
You were on the ball. How did you determine how much for coverage A? Your responsibility for your interest in the building ? The typical HO-6 provides 10% of coverage C, your personal property limit. So, if you took out $75,000 of coverage for your personal property, you'd get an automatic $7,500 for your responsibility in the improvements and betterments. How did you decide how much to take for your improvements and betterments ?

When I had clients buy a condo unit and asked them what was their responsibility, most didn't have a clue. They just said "I only have to insure my stuff inside" I asked for a copy of their association by laws, and it said that they had to insure everything from the sheet rock out. Including fixtures such as sinks, toilets, kitchen cabinets and such. How do you put a figure on that ? You bought a condo unit for $300,000. How much of that is common area covered by the association and how much of it is Improvements and Betterments that you have to insure ? Nobody knows.

I never once saw a unit owner get good advice from their association for what was their responsibility to insure.

Even harder. How does the association know how much to insure their property for ? Most new units are sold with fixtures built in. Who buys a brand new condo with no paint, cabinets, flooring or fixtures ? So the unit is sold and these fixtures are built into the cost of the sale, how is the unit owner to know how much of this they should insure ? The buyer bought it turn key, not as a unit, plus betterments and fixtures.

Easy question for anyone buying a condo unit. Ask the seller, association president, realtor and any insurance guy "who is responsible for insuring the kitchen cabinets, sink, toilet, hardwood floors and wall paper ?" The association or me ? Then ask them to break down what each is worth in the selling price. Oh, Replacement Cost please. Not Actual Cash Value.

Nobody knows til there is a loss a loss then insurance companies review the association by laws, that the association set up themselves. That tells who is responsible who pays for what. And everybody wants replacement cost. Then everyone gets mad.

Sorry for the rant....I've just seen too many bad experiences with underinformed associations and unit owners. Don't blame the big bad old insurance companies, the associations made the rules. Typically from some boiler plate agreement that they don't understand. Even if a lawyer on the board helped draft it.

If you want a good association insurance agreement, get a little old pencil pushing retired claims specialist from an insurance company on your board.
 
You apparently know your Board members, and I know mine. My advice: be careful to trust but verify, making certain you have valid reasons for that trust. In my HOA experience, which is extensive, most HOA Board members know little about what they're responsible for doing. Most often, it's whomever can be convinced to take on the duties is a gift and readily accepted, no matter their skills for doing the job adequately , or sometimes doing the job at all. Our HOA lost a very large amount from our operating fund due to employee theft that went undetected for years (over 6 figures). And our insurance did not cover that theft. So no surprise, the homeowners are on the hook. Moral of the story is, our Board of Directors are open and sharing, including problems, all too often problems they should have been managing to avoid.

There is a widely recognized lack of competence for most HOA Board members for adequately fulfilling their responsibilities (unpaid volunteers mostly).
The advantage that we've seen in 15 years is that most of the Bd members have been in the same position (grounds, building maintenance, etc.) for several years. They know their duties. Why they are willing to do the j*b, year after year, is beyond me. I like to think it's because they know their j*b and know they are good at it and know that's good for their bottom line.

Are they perfect? No. Mostly, we run into personality issues from time to time. Those in "charge" don't appreciate being challenged or even questioned. BUT, a bit of persistence pays off.
 
Lots of excellent thoughts here, but keep in mind that Condo Assn covenants can and do change over time. A close relative has lived in a Midwest condo that progressively cut back what the association covers for maintenance & upkeep. The relative has been regularly begging DW & I to get a unit in her complex, and each time over the years there has been a fly in the ointment. They used to cover everything outside the drywall of each unit, but covenants were repeatedly changed. Now the condo owners are responsible for their own windows & entry doors. The association repeatedly claims it has no $$$ to cover new siding on the units (badly needed). And unit owners have been warned that the parking lot repave will only be done after a special assessment. All this has happened despite a progressive increase in dues well above the rate of general inflation. Examining reserve studies and financial stability evals are prudent actions for prospective condo buyers, but they are no guarantee of what may change in the future. Nature of the beast.
 
Lots of excellent thoughts here, but keep in mind that Condo Assn covenants can and do change over time. A close relative has lived in a Midwest condo that progressively cut back what the association covers for maintenance & upkeep. The relative has been regularly begging DW & I to get a unit in her complex, and each time over the years there has been a fly in the ointment. They used to cover everything outside the drywall of each unit, but covenants were repeatedly changed. Now the condo owners are responsible for their own windows & entry doors. The association repeatedly claims it has no $$$ to cover new siding on the units (badly needed). And unit owners have been warned that the parking lot repave will only be done after a special assessment. All this has happened despite a progressive increase in dues well above the rate of general inflation. Examining reserve studies and financial stability evals are prudent actions for prospective condo buyers, but they are no guarantee of what may change in the future. Nature of the beast.
Most major changes in covenants will have to come up for a vote of the owners. Keep in mind that the board members are owners too and are subject to the rules and changes. Not likely they go out of their way to make it more difficult for themselves without some serious thought for the consequences. EVERYTHING to do with maintaining a building has gotten more expensive. Trying to figure out how to manage those costs can not be a fun j*b.
 
Lots of excellent thoughts here, but keep in mind that Condo Assn covenants can and do change over time. A close relative has lived in a Midwest condo that progressively cut back what the association covers for maintenance & upkeep. The relative has been regularly begging DW & I to get a unit in her complex, and each time over the years there has been a fly in the ointment. They used to cover everything outside the drywall of each unit, but covenants were repeatedly changed. Now the condo owners are responsible for their own windows & entry doors. The association repeatedly claims it has no $$$ to cover new siding on the units (badly needed). And unit owners have been warned that the parking lot repave will only be done after a special assessment. All this has happened despite a progressive increase in dues well above the rate of general inflation. Examining reserve studies and financial stability evals are prudent actions for prospective condo buyers, but they are no guarantee of what may change in the future. Nature of the beast.
Membership's vote is required to change governing docs here in Washington state, otherwise the changes are null & void. Our Board is only authorized to change Policies without consent, which are junior to the governing documents (can't approve a policy that stands contrary to gov docs).

Perhaps visit your state's laws pertaining to homeowner associations to validate these changes were appropriate (legal). You can ready see why such laws need to exist to avoid the situation you are experiencing. It's a whole other legal matter if the Board made changes they were not authorized to make, and their actions caused damage (including financial damage to the HOA [ie no funds for required replacements]).

Boards are typically insured for Board directors' actions that cause damages, so the HOAs insurance would typically cover a claim up to the amount of policy coverage. Of course, all kinds of complications come up with valuing the full extent of the potential damages. This is the reason every annual meeting should provide a copy of the latest HOA insurance coverage and who to contact with questions. You should share it with your homeowner insur. agent to make sure nothing substantial has changed in coverage for Board members' actions.
 

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