I am asked on a regular basis what my thoughts are on buying into the condominium market. Condominiums, or “con-dos” as they are frequently called, are marketed as a great way for people to enter into the joys of homeownership. They are hawked by the local real estate professionals as an excellent way for people with little cash to start taking advantage of the tax savings of a mortgage.
Condominiums are considered an excellent “entry level” or first-time buyer purchase. Condominiums are different from townhomes in that they are all one level and are stacked on top of each other, much like an apartment building. Townhomes are multi-level and are usually narrower, and are preferable in that you will have less neighbor problems since you will not have either upstairs or downstairs neighbors.
It is certainly true that a condo owner has all the benefits of a mortgage when tax time comes around. It is also true that a condo can be a great investment for a first-time buyer.
What is not often discussed by the real estate professionals because they are busy making their next sale are the downsides of condo ownership.
The downsides of owning a condominium are numerous. To begin with, you have the fact that life in a complex is much like life in a college dormitory or apartment building, which is what most people wish to get away from. As a condo owner, you will have neighbors. The difference is that these neighbors, usually own their units and now feel completely justified in defending their right to do precisely as they want and to stop you from doing what you want.
So that annoying Mr. Nosybones next door, who keeps tabs on your love life, or lack thereof, is going to continue to gossip about you to the entire complex as long as you live there.
The next big problem with condos is THE ASSOCIATION. This is the condo owner’s equivalent of Dante’s Inferno. There is one type with many different versions of associations and which one you get, is pretty much a factor of the size of the complex, the make-up of the residents and what good or evil you have done in a past life.
All associations are composed of the owners of the individual units. Each unit is, at least in theory, to be equally represented on the board, and this is accomplished by a vote each year or two for the officers of the association. Depending on the by-laws of the association, an election is held, usually annually, but not necessarily, for executive officers whose job it is to maintain the common areas of the property in good repair, provide for the insurance and oversee the general workings and contracts of the service providers.
What this frequently becomes is a battleground of fiefdoms wherein one person becomes the “president” who acts much like a dictator and feels that he or she is elected for life to the position and that he or she should not be challenged in his or her decisions.
This is usually the start of the hell that is to come for most associations that will lead to restraining orders, lawsuits, fist fights, personality clashes, divorces and vandalism.
The association, or sometimes the board, has the executive rights to enter into contracts, hire contractors to deal with emergency situations and provide for the general maintenance of the facility. As such, they can hire who they want. Usually the by-laws call for a procedure, such as three estimates to be provided for any anticipated work, and then the board makes a decision on who to hire.
The problem that this creates is that the money the board is spending is coming from the owners. As an owner of a condominium you are subject to a monthly dues assessment. This amount is determined by the annual budget and is your portion, on a monthly basis, of that budget.
The danger here is that the board is going to over spend beyond what you as a homeowner would spend, and yet you are responsible for the budget amount of your condo. It is also a danger that the board will cut corners in places that you would not — places that can cause problems for later boards to deal with.
Additionally, there are “special assessments” that the board can assess when a non-budgetary item comes along. This would be something like a new roof, retiling the pool area, or an unforeseen increase in the insurance the association carries.
It can also be something like a toxic mold assessment. A client of my firm was assessed an additional $400 a month because units in her 500-unit development were being damaged by toxic mold. The cost to repair each unit in one of the 200-unit mini-complexes was going to be between $1,000 and $10,000 per unit and it was considered an association problem, so everyone was forced to pay for the damaged units, even if their unit wasn’t damaged.
The stories of association boards running rampant over owners rights are legendary. Another client of mine hired me when the association knowingly and willfully broke into her privately locked storage unit, threw out all of her personal property and sent her a repair bill for the damage they caused.
One client was traveling for a week and came home to find her entire unit had flooded with raw sewage due to a plumbing malfunction. The downstairs neighbor had called a plumber and he had torn all the drywall down from the living room walls to get to the damaged pipes. The carpeting was ruined, the furniture was stained and still wet. Her clothing was ruined and had to be dry cleaned or replaced.
Horrible you say, but at least the associations’ insurance carrier would make it all right. Wrong This had happened twice before. The insurance carrier said it was obviously a systemic problem and they would not indemnify my client. The association said it wasn’t their problem because they carried insurance. Their carrier declined to cover it because the damage was not done to a “common area.” I assume they think the pipes are not common areas. The lawsuit is still going on, but it is costing her a pretty penny, lost time and aggravation, which she cannot collect for. (David Pisarra is a partner in the Santa Monica law firm of Pisarra & Grist. He welcomes questions and (310) 664-9969 or e-mail at).
Originally published in the Santa Monica Daily Press print edition on July 25, 2003. Read the original PDF.