Condo Conversion vs. New Construction

Given the popularity of condo conversion communities in the Seattle area, I think it is worth noting what these are, and what these are not.

I have heard both buyers and escrow companies refer to condo conversion communities as “new construction”. Please know that these are not new construction, but remodels, for the most part asthetic remodels, of older, rental communities. While you are buying the interior, and the interior is remodeled, you are also buying a fractional interest in the exterior. If there are 100 units, you are taking on a 1/100th responsibility for the new roof or exterior paint and all of the major components shown in the reserve study.

If you are buying into a condo building or community that has always been a condo community, the monthly dues for the last 15 to 20 years should have provided for an accumulation of “reserve funds” to replace the roof. If you are buying into a condo conversion, make sure the developer has “contributed” enough monies into reserves, to compensate for the fact that there were never before “unit owners” putting monies into the reserve account toward future replacement needs.

The roof may be OK today. But if it is a 20 year shingle and a 15 year old complex, there should be 15 years worth of accumulated monies set aside by the developer before he turns over the complex to the Home Owner Association. This is to insure that when the roof needs to be replaced in 3 to 8 years, there will be sufficient funds in reserve to buy the new roof. Also make sure that the monthly dues set by the developer include a sufficient amount for reserves. In five years when you need a new roof, you will need five years of owner contributions, plus the 15 years worth of reserves set aside by the developer, so that the roof can be replaced without a special assessment.

Understand that if a condo community or building functions as it should, there should never need to be a special assessment. Every owner, via their monthly dues, should be paying their fair share of future repair and replacement costs each year. It’s a simple calculation which assures that the monies will be in the reserve fund at the time the Major Component item needs to be replaced.

So I leave you with this warning. Find those things that are not new when buying into a condo conversion, and make sure the developer is contributing an amount into reserves reflecting that portion of “useful life”, used to date.

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: cell: 206-910-1000

61 thoughts on “Condo Conversion vs. New Construction

  1. My situation is that I have a 4 plex, I am going to convert it into condos. Once I have the condos approved how is the bank going to see the note it my loan situaion. I don’t own the propety outright yet but once I begin renting the condos does the bank turn over the note to me or do I have to own the complex. Once I do own it will the bank turn it over to me with all 4 tax ids.

    Sorry if the question is a bit complicated

  2. Your question is more confusing than complicated. Why would the bank “turn over the note” to you? You only “get the note” when the loan is paid in full, not when you become the owner of the complex.

    Definitely check everything you plan to do with an attorney before you close on this. Condo conversions require a lot of legal paperwork that can be very expensive. Make sure you know what the cost will be before you close escrow.

    I expect “your note” will be OK. The harder part is the buyer of each condo unit getting financed on a small complex, especially the first one. Unless you have cash buyers, you could run into financing problems when you try to sell them.

    Perhaps one of the lenders here can comment on that aspect.

  3. I’ve just received the Public Offering my apartment building’s condo conversion. How common is it that the sale should close only 2 weeks after work is begun? Work is estimated to last 4 months, so I am assuming it will last more like 6. Is best to discuss this contract with a buyer’s agent or with a real estate attorney? Thanks in advance.

  4. Deborah,

    1) where is it?
    2) do you rent there now, or are you buying one, or both?
    3) Do you have a Buyer’s Agent now? Do you have a contract to purchase?

    Not enough detail for me to understand the question, to make a recommendation. “My apartment building’s condo conversion” sounds like you rent in the building now.

  5. Can you please share with me the negatives of buying a condo conversion ( older building-20 years old) compared to buying new construction (to be built condo).

  6. Hi Mario,

    Every property, be it new or 20 year’s old, has positives and negatives. Here are some of my thoughts, putting certain properties in my head.

    Highrise style, new vs. older. Biggest concern is ceiling height. The newest of buildings may have ten foot ceilings. Just before that, nine foot ceilings, older 8 foot ceilings. On resale, you compete with the 9 and 10 foot ceilings, if you purchase a conversion with 8 foot ceilings. If the price adequately reflects that difference, which obviously just can’t ever be changed, then that’s OK. Go to all three before you purchase and compare the price and “feel” of the same space with the higher ceilings. In other words, they shouldn’t cost the same as one another. Maybe 10′ vs. 9′ isn’t a huge difference, but 8′ vs. 9′ and 10’…? You can always put a fancy counter in yourself, or stainless steel appliances…but you can’t raise the ceiling.

    Interior finishes. Some have the exact same interior finishes on the conversion, vs. 2 or 3 varied cabinet and countertop styles. The ones that have some variation are likely going to be better on resale, vs. those that allow for no options at all. If there are 3 in the building for sale, for example, when you sell it, if they are absolutely identical, then it is just a price war.

    Of course there’s the obvious. “New roof” on new construction means new wood, new sheathing, new trim wood, etc. New on a 20 year old can, and usually does mean “new composite shingle” over old wood and trim.

    I’ve been meaning to write a “please don’t use price per square foot” article. Price per square foot doesn’t cover obvious differences, like ceiling height when comparing condos in different buildings.

    The main issue is if the builder has done both, fix all components to best it can be today AND reserve for the others. A 20 year old condo, would have 20 years of “reserves” from the reserve study. The developer of the conversion should be doing a full check of all components (lobby, pool, roof, elevators, etc…) and both fixing up and reserving for replacement cost. If the roof is 5 year’s old, for example, on a 20 year shingle, then five years should be in reserve when the building is turned over to the owner’s HOA.

    Windows…almost never replaced on a conversion.

    There’s a few to keep in mind. I’d need more specifics as to style of condo, highrise? garden apartment style?

    I wrote that “run to Redfin” article on one conversion that I just loved because of location. I felt for about 1/2 of the units, the price reflected the issues regarding all renovated exactly the same and ceiling height. Those sold in the first 7 days. Whether it’s new or conversion, consider the resale factors as resale market is much tougher regarding pricing these differences, than the builder/developer.

  7. Hi,

    I live in a 6 unit condo conversion. The conversion was done (former apartments) last year and everyone except the developer who owned the property are new owners as of last year. The property owner/developer never put anything into reserves and the way the condo docs were drawn up, barely anything is included in present expenses. Trash service, water, and sewage are not included in our condo fees and are seperate. We have minimal property maintenance expenses and only snow removal (walkways NOT inlcuded). Everything that goes into our reserve, which because it is new there is not a lot in t here, all goes towards future expenses. Building A for example needs a new roof within 3 years I was told. Shouldn’t a reserve been set aside for that roof PRIOR to the new owners coming into this? Instead it is all set up so that we are supposed to be responsible for this roof and who knows what else. Everything appears to go for FUTURE related expenses while trimming everything back to nothing for present owners. Should I see an attorney?

    Any advice on what to do regarding this situation would be greatly appreciated.

  8. Jason,

    For the most part, “six units does not a condo complex make”. When you buy a condo in a six-plex, there is a basic understanding that special assessments will be the norm to handle most things. No one should buy into a small complex expecting “the HOA” to handle everything. An HOA of six people just won’t accumulate enough monies, especially on a conversion project.

    I don’t see that as much here in WA as I did in CA.

    As to what should the developer have been obligated to do? Often the “rules of what has to be done” don’t kick in unless the complex is a certain size, and smaller ones do not have to comply.

    I recently heard the number to be 50 units. There was a complex with 50 units, but one was reserved as the Manager’s Unit to make the number 49 to avoid compliance. When the owner’s hired a management company and sold the Manager’s Unit, it kicked in a whole set of requirements they had never been obligated to adhere to when they were 49 units plus a Manager’s Unit.

    I would consult with an attorney, as generally a conversion involves “bringing everything up to speed” at least. Selling last year with one unit needing a roof so soon, is not good. Not sure what the obligations would be for a six plex, but I’d definitely ask an attorney. But be sure to tell the attorney FIRST that it is a six plex, for the reasons already stated.

  9. we are converting an 8 unit apartment complex in Oak Harbor, WA. We are going to convert them with the first time buyer, or last time buyer in this area. The building is almost thirty years old, but is in excellant shape, what with 10 years left on a 15 year rook, new windows, and or new insulated glass in cluding patio doors. Outside yead has had all big trees (fir and cedar) removed to keep them away from the roof. Recently landscaped. Any advice on how to do the conversion paperwork. This is a first time request for the city of Oak Harbor. I expect they are going to set an example with us for other conversions. We have talk to an attorney, (local) and he has a list of survey, horizontal regime survey, warranties, and CCR’s qualificatins to submit to the city. Any big time advice that you can give us? Thanks, Carol Costner

  10. Carol,

    You say the roof has 10 years left on a 15 year life expectancy, so you need to put 5 years in reserves, before you leave the project.

    You have to do that for every major HOA component, so get a reserve Study done. Fix everything up to snuff and then reserve for that portion of each and every item for “used useful life”, to compensate for no condo fees and reserves in the past.

    The future will then take care of itself, if the condo dues are set accordingly, with a sufficent reserve component in the monthly. The Reserve Study will tell you how much that is.

    You may want to calculate how much of the profits will need to be left behind in the Reserve Fund, as that could really affect your net profits.

  11. My wife and I are considering a condo conversion project in King County. I understand that several costly requirements will kick in if the building is over a certain number of units (e.g. as mentionedabove for a building of over 50 units). Is there a thumbnail guide to what these tiered requirements might be?

    Also, I heard one news story about new ‘anti-conversion’ laws that were proposed – any latest word on this?

  12. James,

    A 10 plex is more of a hybrid. Usually can’t operate without special assements over the long haul. Ten people just can’t provide sufficient reserves to cover component replacements…or won’t. The monthly would be too high for each person. I’ts a good 3-5 year move though.

  13. Hi Thanks for your info. Could you please send us some names of some attornies, that will complete the paperwork for us. Thanks, Carol Costner

  14. Ardell So how do we get a reserve fund completed? We know how to do the refurbishment as I have been in construction for years. Please advise me as to the contacts that could be made. Thanks, Carol Costner

  15. Carol,

    Regarding attornies, if you are local go up to Russ Cofano and Craig Blackmon in the right sidebar and email them (their email is next to their picuture and not under it). If they can’t help you, they likely can refer you to someone who can.

    Regarding reserves, I just sold a unit in one complex that put on a new roof instead of putting 12 years worth of roof replacement cost in the reserve fund. Check with the attorney, but seems you should have a reserve study done BEFORE you start working on anything that is common area or HOA responsibility. Then if it is at or near the end of it’s usefuly life, just replace it. That will help the condos sell at a higher price and cut down on your need to leave reserve funds behind. My $.02

    Just Google Reserve Study. There are 3-5 main companies who do these on the West Coast. Have them come back when you are done and not on the original Reserve Study that they prepared, which items you replaced so they can start the clock back to year one. The update fee is minor at the end, since they don’t have to return to the complex necessarily to do the update. Mostly a computer calculation at that point.

    They will then calculate the total amount you need to leave in reserves when you pass over the complex to the HOA and also tell them how much of the dues need to be set aside each month into the reserve account for future replacement costs.

  16. Hi,

    I own a four plex in Seattle WA, I am thinking of convert it into condo and sell. What are the things I need to know before I get started? there is a loan on this building, is the bank going to be ok of this conversion?

    Do I have to offer moving allowance if all the lease are month to month?

    where can I find a real estate lawyer and a developer who is experiencded of this kind of project.

    and is Muti Family means I can not break it down and sell in units?


  17. I am looking at a conversion project in Redmond. I was told the builder was Oceans West, but I can’t find anything about them on the web. Have you heard of them? Are they reputable?
    The development looks to be really re-done, incl. the roof.
    thanks for your help.

  18. Gerri,

    Did you mean “builder” as in the person who built the structure originally, or the company in charge of the makeover?

    I don’t know “Oceans West”, but you should ask what other projects they have done. Is it Riverwalk?

  19. Yes, it’s Riverwalk and Oceans West is who they say is doing the makeover. I’ll get more info on other projects in the area.

  20. Honestly, the quality of the original construction is at least as important as who is doing the makeover. Looks like a flat roof to me, so it can be “refurbished” but can’t be ” new” usually. What do you know abou the roof and exterior. Is that stucco and was it always stucco since 1983 when the building went up? I doubt it as 83 was pre-stucco for the most part. Did they stucco over the original exterior or remove and replace?

    Haven’t been over there, but the prices look good. Think I’ll stop by next week. I think they are at least 80% sold out, so bigger issue is the value of what’s left vs what’s already sold, given their location in the building. Not sure about that spiral staircase feature.

  21. I don’t recall it being a flat roof, and it says 40-year composition roof in the materials. I don’t recall if it was stucco before, but these are good things to check further about. Nice features inside.

  22. They look like a good value to me, given the location. I’ll stop by and give my thoughts afterward. Yes it does say composition, which require pitch. Interesting. Hard to see the pitch in the photos given the angle of th shot. Are you looking at the small ones or the big one?

  23. Not sure about the subject of your last question, which photo am I looking at, or which condo? The roof is definitely pitched and we are looking at the smaller 2 BR unit. I’ll be interested in your thoughts after you visit.

  24. I purchased a townhouse style 4-plex nearly four years ago and have just finished some renovation of a couple of the units. One of my new tenants has asked about purchasing his unit and suggested that I might be interested in selling other units. He’d like owner financing with perhpas $5,000.00 down. His unit is a 2 bedroom, one and a half bath unit with a little over 1200 square feet. I would not sell it for less than $75,000.00.

    Do you have any recommendations as to the feasibility of doing this, costs involved and how to go about doing it here in Texas? Thanks.

  25. Me and my husband just bought a duplex in the Seattle area and we are planning to sell both units as a townhouse. We are advised by the King County Housing to talk to a lawyer regarding the conversion. My question is what are the loan programs that we can use to sell each unit separately? Will a duplex be easier to convert to a townhouse than a 4plex into condos?
    Thank you!

  26. One of these is a legal question and one is a lender question. You might want to post the legal part on one of Craig’s posts, or call him and see if he has a referral to another attorney.

    As to the loan question, ask Rhonda on one of her posts, though I don’t know what the loan is for if you already own it. You may want to make that more clear. You can call Rhonda or ask the question on one of her articles. Is the loan for the remodel/construction costs?

    This post is about large condo conversion projects and people buying a converted condo vs. a new one. I have not seen too many small ones. Usually a builder buys the place and tears it down to build something new there if the lot is small.

    I have seen a 4 plex as condos over by Licton Springs partk, but it was built that way, not converted.

  27. Are there any risks involved in purchasing a condo conversion? Some guidelines on what to look for would be helpful since this I really don’t know much about this and the price of this condo is rather expensive.

  28. Joann,

    From what I have seen, the risk is more as to future value. Same as buying a flip house. The value should not be as high as new construction, as most of the components are not new, only the aesthetics.

    Look at the price of a condo not converted, look at the price of a brand new condo and then realize how much you are paying for some new carpet and kitchen upgrades.

    Obviously someone is making a lot of money on some depreciating assets like carpet and appliances.

  29. I hope this is the right place to ask this question. I am in the process of purchasing a condo in a new construction development. It truly is new construction, not a conversion. The complex is just 11 units.

    I’m using a first time home buyer program through Fannie Mae. Lately, it seems they’ve started requiring thorough reviews of condos in light of the “melting market”, instead of limited reviews. Do you have any idea what kind of requirements Fannie has for condos to be purchased?

    My lender says she hasn’t had to put a condo through a review in 7+ years and is not well versed about what the criteria are. I’d hate to be well into the buying process and find out it was all for nothing.

  30. I am in contract to buy a condo converted a year ago in a 16-unit building. The HOA docs I just got show that there are no reserves and that $1,117.00 in dues are delinquent. Is this a big enough “red flag” in your opinion to warrant backing out of the deal?

  31. Stina,

    If you can barely afford it, then yes it’s a big enough flag. However, note that almost ALL small plexes, 4-8-12-16, are not meant to cover all major components via reserves. It’s virtually impossible to collect all of the replacement component funds from 16 people. So all small ones run by special assessment.

    It’s more like buying a single family. Need a new roof? You have to pay for it. Exterior needs painting? You have to pay for it.

    So if you look at it that way, and are prepared to come up with big chunks of money for repairs and replacement of major items, then you would still buy it. Just don’t expect “the HOA” to pay for things. The HOA is you times 16.

  32. Can anyone explain me how condo conversion work, I want to buy one, the price is low for the area, so I just want to educate my self a little more about it.

  33. John,

    What you want to pay attention to is the age of the components outside of the unit you are buying. Generally condo conversions will deal primarily with the aesthetics. All new kitchen, new carpet, sometimes resurfaced tubs vs. gutted and new bathrooms.

    The main things to pay attention to are few if any will change out the windows or take the remodel behind the drywall to electrical and plumbing. Some put on a new roof, but some will not depending on the age of the roof at the time of the conversion. Some will put on new siding, while others will simply paint the old siding.

    These issues affect the amount of money the developer should leave behind in terms of reserves. If there is a pool and or clubhouse, those components should be inspected with regard to deferred maintenance and the amount the builder will place in reserves when he leaves.

    Generally what you are looking for is a Reserve Study, as the historic ownership as apartments did not have a funding of reserves the way a condo would have, from the time it was built. This could create the need for higher monthly assessments imposed by the HOA shortly after you buy, or special assessments within a short period of ownership. So don’t just look at the unit you are buying. Look at the overall condition of the complex.

  34. I bought a condo conversion 2 years ago in Kirkland. I was told by the developer that they replaced all hot water tanks that were over 10 years old. I was the first person to move into my building and they rushed to get it all done for me. On Friday I noticed some wet carpet in my place and discovered my hot water tank needed to be replaced. I made an appointment for that afternoon to get it replaced. In the meantime, I find out it has been leaking to my downstairs neighbor’s for 2 days! Nobody bothered to tell me. The hot water tank ended up being 15 years old!! Do I have any recourse for the damages done to my unit and the other 2 units? If not, it’s $20,000. out of my pocket to fix.

    Thanks for any help you can provide.

  35. “was told” vs. it was in your contract may be difficult. See if there is anything in the contract or in any of your paperwork and then contact an attorney once you determine if you have any proof. Call an attorney either way, but having proof of what you were “told” would clearly be better.

    Even if it was 10 years old and is now 12 years old…that’s not good. They likely should have replaced any over 5 years old, in my opinion. Most hot water tanks have a life expectancy of 10 years, even if they last longer, especially if it is electric vs. gas, which it likely is.

    Most HOAs have a deductible of $10,000 or less on their insurance policy, and you should have your own policy on your belongings that supplements the HOA deductible and covers anything that could be considered due to your own negligence, like overstuffing a washing mashine that overflows.

    If you don’t have any insurance besides the HOA’s “Master Policy”, that won’t help you with this, but you should get it if you don’t have it. HOA Master Policy insurance is not enough. But I’d think their policy may cover at least some of this. Bring the insurance info to the attorney as well.

  36. Yes, the hot water tank was apparently 13 years old when I moved in. I did not have any other insurance, but I do now. The HOA is saying it’s my responsibilty and they will not cover anything. I do not have it in writing, but my neighbor thinks she has something in writing.

  37. Kim,

    This is a big issue. You need an attorney. Also, I would strongly suggest that the attorney be asked to submit a claim to the HOA insurer regardless of what The Board says. I believe that as a member of the Homeowner’s Association you have the right to file a claim and get the answer from the Insurance Carrier and not The Board. But check with an attorney on that.

  38. Was the age on the tag? Do you have a picture of the tag with the date on it? Was the person who replaced it guessing the age? What proof do you have as to it being 13 years old?

    Better to go to an attorney with some good proofs and documentation. You may want to contact the developer who did the conversion project as well. Most in Kirkland were done by very reputable companies. They may have records regarding your hot water tank’s age on file.

  39. The water tank has a code on it that verifies the age. It shows Month (B) and year. It is all in water heater code šŸ™‚ I will call the company that replaced the tank and see if I can get the tag back.

  40. A written statement from them regarding the age of the one they removed attached to the replacement receipt might be the best you can do. I doubt they keep the old tanks around.

  41. Ok, thank you. I have contacted one of the attorney’s above. I am hopeful they can help. It’s not like I have an extra 20,000.00 laying around.

  42. First of all, THANK YOU for writing this blog. Being a first time condo buyer, I have been through the wringer with this process.

    All and all, I have just put an offer on a 1 br condo in a new construction complex. The developer generated a standard GCAR contract and I handed over my earnest deposit. I have 10 days to review the condo documents and I can rescind my offer without losing anything.

    Thought I knew what I was doing until the developer handed me the 300 page condo docs with a binder clip and said, “Go for it.”

    I’m not married to the unit, I just need a place to live that is close to my job. And don’t want to hire an attorney to review the docs.

    I probably will rescind the offer and look for a different unit with a more established condo history. But as I may run into these people again, I’d like to be able to give a reason.

    What are some “red flags” that I can look for in the condo docs so that I can rescind the deal with a reason?

    And no buyers agents. I’ve had a bad experience with one.

  43. Sounds like the builder has had previous trouble with people running from the 300 page docs, hence the “Go For It” note. It’s like saying, don’t bother trying to read these, just Do It. Pretty sad. Still, running due to the size of the docs is a new one for me.

    I expect you had some reservations before they handed that to you. If you don’t want to read them in order to buy. I see no reason to read them in order to cancel. Better to be honest as you were here and say this just looks to complex for me to deal with right now.

    I’m one of those honesty is the best policy types though, so maybe someone else is better at made up reasons. I really suck at that.

  44. We are looking at the Hillwood Condos in Des Moines. Anyone familar with them? They look nice, but the developer did little more than cosmetically fix them up. He states right in the public offering that only windows that were cracked or visibly damaged were replaced, no attic work was done and even though there was water intrusion in the lower units, he did not follow the engineer’s report and replace the foundation drains. He replaced the curtain drains. The public offering also states that even when replacing drywall in those units, they did not check for mold. Only visibly leaking pipes were replaced, and none of the hot water tanks, which he states are at the end of their useful life. Price is about $199,000. Ideas?

  45. Terri,

    I don’t know them and do not work in that area, but you clearly have done your homework and those red flags could equal mega special assessments doen the road and high dues as well if those tanks blow. How old are the hot water tanks?

    New windows is not a normal update for a condo conversion, however. Fixing cracked windows only is pretty standard.

  46. I am concerned because when you really read the engineer’s report and recommendations, not all items were addressed when it comes to drainage issues, wiring, etc. (Hot water tanks estimated age are 12-15 years .. and we figured we will replace ours before we move in). I didn’t know about checking the what the developer put into reserves – I will do that. All new buyers have to pay 2-monhs HOA dues as an “ante” of sorts and I accepted that as a way to build reserves. Also – we are buying a 3-bedroom 2 bath home, but only ONE parking space comes with it and it’s clear across the way – not even in front of our building. The agent admits that they allowed too many early buyers to purchase 3 spots when it should have been limited to two. I realize that buying in the lower end ($200,000 range) of the market will require some trade-offs – but I’m a little uneasy.

  47. Terri, the best insurance for a condo is to buy one that is existing, with a HOA that has been in operation for several years. I think conversions are risky, as is some brand new ones.

    Many times with the conversions or new construction units you get a complex of new owners who are on a budget, and son’t want to approve increases in dues so that reserve funds are enough for future problems, or simply maintenance.

    I recommend looking at complexes where not everyone is the ‘same’ age range. All young or all retired will be much more budget prone in the ‘wrong’ way than a group of more experienced owners.

    Just because it is new or newly converted doesn’t mean a condo won’t have problems. And, when you buy, have your own inspection too. The inspector won’t look fully at all the buildings, but at least have him/her look at your roof area, and siding areas, and drainage around your building.

  48. Terri,

    Since you have named the actual complex, I am very limited in what I can and can’t say on a blog. In most condo complexes, if not all, windows and hot water tanks are owner responsibilities from day 1 if they are new condos vs conversions. However it is my feeling that there should be a law requiring that the hot water tanks be addressed, even if it is not paid for by them, but a mandatory extra charge for every condo.

    What you want to look for is a Reserve Study. That study should have a recommendations for the amount to be put in reserves before the complex is turned over to the HOA (owners). You want to match that against what the developer has committed to putting in, though they may not do it until the end. The Reserve Study rarely recommends 100% funding, but often makes 3 or more recommendations at different levels: “x to be 60% funded, x to be 70% funded, x to be 80% funded”. The remaining amount being built into the dues before the life expectancy of any major component is over.

    If you do proceed, make sure you have insurance coverage in case someone else’s tank blows and water intrudes on your space. Not the HOA insurance with a huge deductible, but your own supplemental policy for your things plus a smaller deductible to bridge the gap. Also get a home warranty, the type only available whe you are buying and selling and renew it as long as they let you. That will help with electrical and plumbing issues, heater if it goes, and a few other things.

    The issue on resale will be what if there are 10 for sale when you try to sell and 4 have 3 spots, 6 have 2 spots and yours is the only one for sale with only 1 spot? In my experience, regardless of what was paid for a spot at time of purchase, they end up at the same asking price and the units with the 2 and 3 spots keep selling and the one with 1 spot doesn’t.

    Say 10 people want to move and there are only 5 buyers. By the time the 9 with more spots sell, there are more coming on market with more spots and the unit with 1 spot keeps getting “left behind”. You need a ratio of total units, how many have 3 spots, how many have 2 spots and how many have 1 including all units and not just those available or just those sold to date.

    I agree that having only 1 spot that is not close to the unit is a considerable issue, and will be even more considerable on resale.

  49. At what point can a developer begin to collect home owner dues? My understanding was the developer was responsible up to the time the Association was turned over to the homeowners. The Home Owners Association would then collect dues as stated in the POS following the transition meeting and election of Board members.
    The developer of our conversion in South Lake Union decided that since they were struggling to sell their last 20 units (out of 56) they would rent the remainder and turn the association over to the homeowners with the developer commanding 20 votes. Also the developer had the management company begin collecting COA dues 2 months prior to the transition meeting and board election.

  50. leroy,

    I know one HOA where the developer still owns and rents a portion of the units 40 years or more after they were built. I don’t think there is one standard for all associations. The original documents are different from complex to complex.

    It doesn’t seem fair for the homeowners to not have to pay dues just because the market got soft and the developer couldn’t sell all of the units. On the other hand, for the developer to stop trying to sell them could be a problem for owners who may want to sell while there are too many rental units in the building.

    I suggest you have a meeting of all of the owners. Usually there is someone who lives there who can read the documents or who has brought them to an attorney to answer the question you raise. It wouldn’t make sense for all 36 owners to separately get a legal opinion. If no one has asked an attorney yet, it shouldn’t cost much if all or most of the 36 owners chipped in to get an attorney to check if the developer is acting within his rights under the original document.

    In the HOA I mentioned in the first paragraph, the developer clearly reserved the right to own and rent some of the units after the HOA was turned over. He did have to pay condo dues on those units. I doubt the developer can hold the 20 units and rent them without paying his share of the condo dues while he does that. Though he may have a reduced rate or a limitation on the amount his does can be increased. So check your documents carefully.

  51. Hello. I was the first to purchase a condo in a six unit complex a year ago. One other has sold. So the developer owns 4 out of the 6. We haven’t been charged any HOA dues, but the lawn has been mowed once in the last 4 months and there is bird infestation in the attic space and dryer/other vents. When I brought this up, the listing agent (my only contact) said the developer was nice enough the pay the HOA dues for the past year for me while I was the only one in the building….. is that true or was he legally bound to pay them until a percentage was sold? She said there isn’t a reserve with $2500 to fix the bird problem, so she said I should wait until the birds fly the coop.(!!!??). If there’s no HOA, how do I get this fixed- out of my pocket for the welfare of my unit and the building as a whole?????

  52. Hannah,

    You likely have to contact an attorney on that one. With only 6 units, your perception that the HOA covers things is not likely accurate. In my experience, 6 owners cannot feed enough money into the HOA to cover much, and problems are handled via special assessment.

    Given 4 are still vacant, there may be legal obligations of the developer while he still IS the association, before he turns it over to the owners. So asking an attorney who specializes in condominium laws is what I would recommend. The agent is not the person to ask and generally has nothing to do with the HOA issues. See if you can find out who the attorney was who prepared the condo documents for the developer. Their name should be somewhere in your records or available in the County records.

    Even large complexes generally do not budget for bird issues. When I managed large complexes in the past…it was not a reserve or budget item. I do recall one bird issue that was determined to be caused by the roof installation, and the roofer came and did the repair. One of the owners wanted the bird poop cleaned out of her attic, but that was not covered.

    In most cases if a buyer purchases in a very small complex, they should not be led to believe that the HOA is someone other then themselves and their few neighbors. Since you have never paid any dues, I would think at minimum you would be responsible for 1/6th of the cost to fix the problem. Unless, the reason the birds found a way to get in, was a construction defect.

    All documents are different, so I don’t know when your dues were supposed to begin. But it is standard that small complexes run somewhat like a condo and somewhat like a single family home, given the small number of people paying in to the HOA.

  53. Hannah,

    Not sure of the condo master insurance policy would come into play. You may want to check on that insurance and make sure you have a good supplemental policy of your own with a lower deductible than that of the complex policy.

  54. Thank you for the response to my question. It gave a little insight as to what would be legitamate for me to pay. I’m happy with 1/6th. I will talk to a lawyer. Should I get a hold of the developer, since he “is” the HOA right now…. rather than talking with the listing agent, who isn’t very tactful?

  55. Hannah,

    The listing agent has nothing to do with your ownerhisp issue, though I would expect he/she would give you the contact info you need for the HOA. If you had a buyer’s agent when you purchased, that agent might be able to help you get the contact info you need. But neither agent is involved in owners and the HOA after you purchase.

    When you purchased you received documents, a big stack of them if it is a condo vs. a PUD. The info you need should be in there. The escrow who closed your transaction may be able to help you get the HOA contact info as well.

    Remember, bird problems are not covered. Roof problems are. That’s a huge distinction. Who owns your roof? That is who is obligated to pay for a “roof repair”. Calling it a bird problem vs. a roof or eaves problem, will stall action. No one is in charge of birds except God šŸ™‚

  56. Thanks so much. I feel a little less cornered. I have the contact for the developer of the condos. There hasn’t been any election of board members, so there is no real HOA. It’s me (as an owner of 1/6) and the developer. Should I put in writing a claim to have the “roof/attic” taken care of (paperwork says I own up to my ceiling). Does he have to cooperate with me? I’m okay with paying my share, I just want the issue resolved. *sigh*

  57. Hannah,

    As I said earlier, the only time I had this problem the roofer, who made a skazillion bucks putting the roof on šŸ™‚ was more than happy to come out and fix the problem as part of the roof warranty.

    It depends on what the fix is. How do you know it is $2,500? What would the fix be for $2,500? I’m 99% sure whoever built it can get it fixed for less than that. Birds are hard to keep away though.

    I’m glad you feel better. I’m pretty sure the laws for condos under X units are different than for those over X units…and I’m not sure what X is here. I just sold a townhome in an 8-plex, but they are all single family homes and not condos, as most Seattle townhomes are.

    I once sold a condo in a 4-plex near Licton Springs park, but made it clear to the buyer that it was like four people jointly owning a single family home, and there was no great HOA fairy with a magic wand.

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