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Condos’ Dirty Little Secrets: REVEALED

If you really want to, you can skip your physical examination with your doctor to save money.  Things could be fine, but your body isn’t perfect, and life has its wear and tear.  Things could also be really bad, and because you didn’t have yourself assessed, the cancer spreads, the limp worsens, etc…  Depressing?  In the interest of saving money, many condo associations have been skipping their check-ups, scrimping on maintenance, and then when the big bill finally needs to be paid because the repairs can’t be ignored, the condo-owners themselves get find a hefty assessment fee for the repairs (something in the ballpark of $60-80,000 per unit!) stinking in their laps.

Starting June 12th of this year, the Seattle Times reports that a check-up termed a reserve study which every condo association will be required to prepare and disclose to prospective buyers which lists just how much money will be needed for existing maintenance that still needs to be done, such as new paint or a repaired roof.  This money is the reserve.  This reserve account is separate from the condo project’s annual budget.

There have been far too many buyers who purchase a condo only to find in the aftermath that they are strapped with a huge special assessment that they are expected to pay for because their condo board had virtually no reserves and was left with the only option—making the condo-owners cover it.   Since these special assessments usually happen when maintenance has been long neglected, condo owners are often slapped with enormous bills.  Furious, these angry buyers turn on managers, agents, the boards and the seller.  But what they really need to be is informed so that they knew what to expect before buying.  This law will make that possible.

A condo association may choose to forgo this reserve study only if it will cause “unreasonable hardship,” but is then required to tell inform all prospective buyers in writing: “The lack of a current reserve study poses certain risks to you, the purchaser. Insufficient reserves may, under some circumstances, require you to pay” an assessment.  This might serve as a deterrent to shrewd buyers.

Certainly, a unit for sale from an association has no reserves is going to be cheaper, noted Marshall Johnson, president at the CWD Group.   But what the condo associations save by scrimping on the reserves will be lost in the price they get for it.

This new law will also bring Washington to the top of the list amongst only a handful (five) of other states who now require condo associations to provide a reserve study. 

Kris Sunberg, a seasoned condo attorney, says that the condo world’s dirty little secret is that “most condos are severely underfunded.”  He also predicted that once the actual cost of penny-pinching on reserve accounts dawns on associations, the reserves will grow and the problem will have corrected itself. He calls this new law the “biggest thing to happen since the Condominium Act of 1990 was passed.” 

Read the Times article here