In Virginia, buyers of condominiums and properties within a homeowner’s association have a three (calendar) day review period to review the “resale package” or “condo docs” following a ratified contract. In the District buyers have three business days. (Typically these are not available in advance because associations charge a fee, and most sellers are reluctant to incur that fee before receiving an offer. Several items in the package are also time-sensitive, so if the package is too old then sellers will need to pay for an updated package, so most sellers choose to wait until the offer is received before ordering.)
Sometimes the documents are electronic or online, or often they come in a big binder for your reading pleasure. Some of the items that are supposed to be included* the resale package are:
– Bylaws, rules, and regulations of the community (e.g., pet, noise, and rental policies)
– The annual association budget
– Two months of Board minutes
– A statement from the property manager about whether the unit is currently in compliance with rules (do NOT assume that if there is a violation the seller will remedy it prior to settlement!)
– Master insurance policy
*Unfortunately sometimes items are missing from the resale package. You can ask for the missing items, but it does NOT extend your three day window for rescission.
There will be a lot of information to read through in a short amount of time, so I recommend buyers first prioritize these three items:
– Review the rules and regulations to make sure you can live with them. Even if you’ve verbally been told otherwise (e.g., “oh, no one actually carpets over the hardwoods and it’s never a problem” or “there are lots of owners with dogs even though the policy says no pets”, or “of course you can install a washer/dryer.” These are the rules and you should be prepared to have them enforced. There are no guarantees that a lax Board will always remain lax.
– Look at the percentage of units that are more than 30 days past due on fees. Could it be indicative of a financially strapped community with short sales and foreclosures to come?
– Compare the reserve balance to the engineering study, which is a study that estimates the remaining useful life and cost to replace or repair for community items such as parking lots, roofs, and common areas. Engineering studies are typically performed every five years.
– Is there a move in fee or capital contribution required at settlement? This is becoming a big trend for condos to assess buyers a fee to help fund their reserves, sometimes it can run into the thousands of dollars.
The three day period can be a stressful one, because it’s difficult to get more details if needed in such a short amount of time. Property managers are often restricted from giving information to non-owners, further complicating the ability to get details related to a buyer’s concerns. The remedy is to negotiate with the seller for an extension of the period, or to void the contract, so it’s best to read the documents immediately upon receipt to identify any potential issues early.