I took one look at the sparkling new kitchen and fancy mosaic backsplash, and I was ready to sign my life away. Like many buyers, I had a list of criteria for my new condo: one bedroom, washer and dryer in the unit, assigned parking, and it had to be pretty. As a responsible homeowner of a pretty condo, I attended my first annual meeting. I was nominated and elected to serve on the board as president. Fast forward one year later, and I’m less than enthusiastic about my title as homeowner and president.
After eights years on my board, I started my career as a community association manager, and I was shocked to discover how other buildings operated. There’s a lot I didn’t know when I purchased my condo that I wish someone would’ve told me. Whether you own a condo or plan on buying one, there’s more than shiny countertops you need to be aware of. Let’s begin.
How to Invest in Real Estate While Working a Full-Time Job
Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.
They Can’t Do That!
You’re right, they can’t — but that doesn’t mean they won’t. Unfortunately, I hear this all the time. Either management, the board, or both are sidestepping the rules or the law. Homeowners often reference their governing documents and the law as though they’re enough to inspire compliance. That’s like assuming that speed limits will stop people from speeding.
Who is to blame for this? An apathetic group of homeowners that left the burden of managing the association to a select few — or worse, management. It’s not management’s job to serve as your board. The only group that can effectively “enforce” the rules are the owners, and if they stand back and do nothing, they’re just as guilty.
If you suspect that your board or management isn’t meeting their obligations, it will be up to you and your neighbors to correct the problem. This may result in the removal of board members, management or both. If you’re “phoning it in” and assuming someone else will take care of it, you have no room to complain when your treasurer skips town with your money. This applies to investors as well. You’re not exempt from serving on the board and protecting your investment.
Joe Blow is Running Our Board
Congratulations, you elected him! Are you having trouble remembering when that was? I’m sure you had a good reason for skipping the annual meeting; everyone always does. In most cases, the association is required to have ONE annual meeting of the members. Typically, the timeframe is specified in your bylaws, so it should not come as a shock when you get the notice every year. I said “notice”; it’s not an invitation for you to consider.
When owners skip meetings, sometimes the guy in the back volunteers for the board because there’s NO ONE ELSE IN THE ROOM that’s willing. More often than not, associations barely make a quorum. Sometimes it’s the same people that show up month after month, year after year, and many of them have already served on the board. That, my friends, is how Joe Blow becomes Mr. President Blow. All he wanted was free refreshments, and now he’s in charge of your non-profit corporation.
You don’t need to possess any skills to serve on the board, and typically there are no qualifications other than ownership. Scary. In the corporate world, board members are generally highly educated, professional individuals who have obtained specific educational achievements that qualify them to be in the position to which Joe Blow was elected. I’m not suggesting that board members obtain a business or finance degree. However, familiarity with the laws that pertain to the Association is prudent.
The bottom line is that your absence is what allows this to take place. If you don’t plan on volunteering for the board over the course of your ownership, do us all a favor and buy a house.
Self-Managed is Self-Destructive
I once took over a self-managed building that hadn’t tested their fire systems in seven years. In most states, this is an annual requirement. Fire testing reports aren’t included in the resale certificate, and most people assume tasks like these are being taken care of. Can you imagine the liability the board would face if owners perished in a fire that could’ve been prevented? Associations cannot afford this kind of risk nor can you as a future homeowner.
Without the guidance of a community association manager like myself, board members may not know what’s required to operate a building resulting in serious oversight. In this case, no one on the board knew that annual testing was required.
Managing your own building is like doing your own taxes — you save professional fees, but you’re likely to pay for all the errors you make by simply not knowing.
If you’re thinking, “That’s it?!” then stay tuned for part two. I’ll discuss another round of topics that even the best real estate agents can’t prepare you for.
Are you a condo owner? What would you add to this article?
Leave your comments below!