When reviewing condo documents, several red flags can indicate potential problems with a building’s financial health, management, or resident relations. These include low condo fees, frequent special assessments, an underfunded reserve fund, a lack of meeting minutes, outdated reserve studies, ongoing legal problems, and recurring issues that remain unresolved.
- High or Rising Condo Fees: If fees are very high or keep going up without a good reason, this might indicate financial problems.
- Low Reserve Fund Levels: A reserve fund that is not well-funded could mean there will be future special assessments for needed repairs or maintenance.
- Frequent Special Assessments: If special assessments happen often, it can suggest ongoing maintenance issues and poor planning.
- Legal Disputes: Documents showing past or present legal disputes with the condo board may point to governance problems or conflicts among residents.
- Poor Financial Statements: Financial statements that show consistent losses or high debt may indicate mismanagement or financial trouble.
- Unclear Bylaws and Rules: If the rules are vague or complicated, they can cause misunderstandings and conflicts between residents, suggesting governance problems.
- Restrictions on Rentals: Strict rental rules may affect your ability to rent out your unit later, limiting your investment options.
- Backlogged Maintenance Issues: Documents showing unresolved maintenance issues can indicate ongoing problems that may need a lot of money in the future.
- High Turnover Rates: If many unit owners leave quickly, it may suggest problems, such as dissatisfaction with management or the community.
- Lack of Transparency: If documents show little communication from the condo board or missing meeting minutes, this may indicate poor governance and oversight.
