Purchasing a condo: FAQs

Reviewing and understanding a condominium’s declaration and bylaws is extremely important. These documents stipulate nearly every aspect of condominium living — from the election of the board of directors of the condominium association, to whether you may lease your unit, to owning pets.

What laws and rules govern a condominium?

The condominium declaration creates the individual units from the entire parcel of property. The plat attached to the declaration specifies the boundaries of the unit. Typically, units constitute the air space dimensions of an apartment, the space between the unfinished surfaces of the walls and of the ceiling and floor.

The portions of the property that are not individual units, e.g., the exterior of the building and the grounds of the property, are common elements owned by all of the unit owners as tenants in common according to their percentage interests as defined in the condominium declaration.

What is a condominium "unit"?

Years ago we made a bold move by shunning all Affiliated Business Arrangements (a.k.a., ABAs, joint ventures, or legal kickbacks) and Marketing Service Agreements. Since we no longer have to share our profits with referral sources (i.e., executives and brokers of large real estate firms), we decided the money made from those arrangements should go to the homebuyer.

The truth about ABAs

Sometimes, several businesses that offer settlement services are owned or controlled by a common corporate parent. These businesses are known as "affiliates," while the relationship is called an "Affiliated Business Arrangement" or "ABA" for short. When a lender, real estate broker, or other participant in your settlement refers you to an affiliate for a settlement service (such as when a real estate broker refers you to a mortgage broker affiliate), the law requires the referring party to give you an Affiliated Business Arrangement Disclosure. This form will remind you that you are generally not required, with certain exceptions, to use the affiliate and are free to shop for other providers.

Why shop?

In the end, ABAs wind up costing the consumer more money. This is because the referring party usually receives a reward for keeping the transaction in the family, so to speak. The referral fee is covered by the cost of the transaction, meaning the consumer foots the bill. Are you overpaying for settlement services? Find out with a free online quote.

What expenses do my condominium fees cover?

The expenses that are paid by condominium fees vary from association to association. Some associations collect for utility bills (e.g., water, electric). Typically, the condominium association uses the fees to pay for management activities and any maintenance requirements, including day-to-day obligations for trash removal, exterior painting, plumbing and so forth.

What are "special assessments"?

Special assessments can sometimes be charged by a condominium association in order to pay for a major, usually unforeseen, expenditure, such as the repair of the roof or repaving of the parking lot.

Do I need to carry my own insurance policy for my condominium unit?

It is the responsibility of the condominium association and the board of directors to maintain both liability and casualty insurance coverage on the property for which the association is responsible, i.e., the common elements of the condominium. You may choose to carry an individual insurance policy to cover your condominium unit and personal belongings.

NOTE: In Maryland there has been a recent change in the law. Pursuant to Section 11-114(g)(2), the Maryland Condominium Act-Unit Owner Liability provides that the bylaws of a condominium association may require that a unit owner be responsible for the insurance deductible amount (not to exceed $1,000.00) under a property insurance policy for damage incurred to the condominium from a cause originating in the owner’s unit. The Act further provides that all other deductible amounts are common expenses.

Can a condominium association prohibit renters?

An association may restrict or prohibit the renting of units by properly amending its declaration and/or bylaws. Generally, property values increase and the ability to obtain mortgage financing becomes easier when an association has imposed leasing restrictions.

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