Published 19 July 2018
Buying a condominium is a great lifestyle choice for many people, from downsizing retirees to busy professionals who don’t have time to worry about maintenance and yard work. Many people tend to think of a condo as a house without a yard, but it’s far more than that. In reality, it’s a business partnership that’s managed by a board of directors elected by individual owners.
Typically, condo owners enjoy 100 percent ownership of the interior of their unit, from the first coat of paint on the walls inward. In some developments, owners are also responsible for replacing their roofs. In addition, each owner also owns a proportional share of the common area, which includes the exterior of the buildings, the grounds, parking areas, roofs, swimming pools, playgrounds, etc. For example, each owner in a 120-unit complex also holds title to an undivided 1/120th of the common area.
Owners are responsible for paying their share of the expenses required to operate the complex, which is where things can get sticky. Let’s say it costs $3,600 per month to cover basic monthly expenses, such as maintaining the grounds, purchasing insurance, operating the pool, providing outside lighting and performing general maintenance, in our 120-unit development. That amounts to $30 per month per unit. But wait, there’s more. Let’s also say that projections indicate it will cost $120,000 to replace the roofs, resurface the parking areas and repaint the building exteriors after 10 years. To cover those expenses, the owners will have to set aside an additional $100 per month per unit, resulting in a total condo fee of $130 per month per unit.
In a perfect world, projections are accurate and sufficient funds are set aside to cover daily and future expenses. That’s not always the case, however. When expenses fall short of income, one of two things has to happen. Either the monthly fee is increased or a onetime, lump sum special assessment is levied upon each unit owner. So, how can a condo buyer determine true fiscal health of a condo complex before deciding to purchase?
The answer is in the New Mexico Condominium Act, which stipulates that purchasers of condominium units receive prior to purchase both a disclosure statement and a resale certificate, which together detail the financial status of the association’s books as well as the rules and regulations of the project. Are there any special assessments levied against the owners? How about major maintenance or costly improvement projects that may be required in the future? The documents will also reveal if there are any current disputes among owners or lawsuits the association is trying to resolve.
New Mexico law requires that condo owners and their associations provide all relevant financial information to prospective purchasers prior to closing a sale, so take advantage of the opportunity and make sure you’re happy with the financial health of the development. The law allows you to back out of the deal if you’re not.
See you at closing.
Gary Sandler is a full-time Realtor and owner of Gary Sandler Inc., Realtors in Las Cruces. Gary can be reached at 575-642-2292 or Gary@GarySandler.com.