Buying a Condo or HOA Home: What to Read in the Documents Before You Commit
When you buy a condo, a townhome or a house in a community with a homeowners association, you're buying two things. One is your home. The other is a share in an organization that sets rules, collects dues, maintains common property and can charge assessments. The association's documents tell you how well that organization is run, and what it may ask of you later.
Depending on your state and your contract, you may get these documents before or after signing, and you may have a set window to review them and cancel. Ask your real estate agent early how that works where you're buying.
The governing documents: what you're agreeing to
- Declaration or CC&Rs (covenants, conditions and restrictions). This is the core document. It defines what you own, what's common property, and the rules that run with the land.
- Bylaws. They explain how the association is governed: board elections, meetings and voting.
- Rules and regulations. These are day-to-day rules about parking, pets, noise, exterior changes, trash and use of amenities.
- Architectural guidelines. If you want to change paint colors, add a fence or renovate, these rules decide what's allowed and what needs approval.
Read these with your own plans in mind. If you want to work from home with client visits, keep a boat or trailer, rent the unit out, or renovate, check whether the documents allow it.
Rental rules, if you might ever rent
Rental restrictions are one of the most important things to check. Some associations cap the number of rented units, set minimum lease terms, restrict or prohibit short-term rentals, or require registration and fees. Rules can change by vote after you buy, so ask whether any amendments are being discussed. Rental rules also affect financing and resale, because some lenders and buyers look at how many units are owner-occupied.
The money: budget, reserves and assessments
The budget shows where your dues go: insurance, landscaping, management, utilities and contributions to reserves. Compare dues with recent years. A history of big jumps is worth asking about.
Reserves are savings for major repairs and replacements such as roofs, paving, pools, elevators and siding. Ask for the most recent reserve study, if the association has one. It estimates when big components will need replacing and how much should be set aside. An association that consistently underfunds its reserves may need to raise dues or charge special assessments later.
Special assessments are one-time or temporary charges for costs the budget and reserves can't cover. Ask whether any are currently levied, approved or under discussion, and who pays an assessment approved before closing. That's often negotiable and depends on your contract.
Financial statements and delinquencies. A high share of owners behind on dues can strain the budget. Delinquency levels can also affect some financing.
Meeting minutes: where the real story is
Ask for board meeting minutes from at least the past year. Minutes are where you'll find discussions about leaks, roof or structural problems, insurance increases, planned projects, disputes with contractors, rule changes and assessments before they show up anywhere else. If a big repair keeps coming up without a funding plan, take note.
Insurance: the master policy and your policy
For condos especially, the association's master policy and your own policy have to fit together. Master policies vary. Some cover only the building structure and common areas. Others also cover interior fixtures and finishes in each unit. Find out which applies, and what the master policy's deductible is, because owners can sometimes be assessed their share of it after a loss.
Condo owners typically carry their own policy (often called an HO-6) for their belongings, liability, loss assessment, and whatever part of the unit the master policy doesn't cover. Get a quote from a licensed insurance agent with the master policy in hand. In coastal areas, confirm how wind and flood are handled too. See Homeowners Insurance 101 and flood insurance basics.
Legal and financing red flags
- Pending litigation involving the association, especially over construction defects, can complicate financing and resale.
- Lender condo approval. Many lenders review the condo project itself: its finances, insurance, owner-occupancy and litigation. FHA and VA loans have their own project approval requirements. Tell your loan officer the specific project early. See how to choose a loan officer.
- Transfer and resale fees may be charged at closing. Ask who pays them under your contract.
- Estoppel or resale certificate. This document confirms the seller's account status, current dues and any assessments owed. Make sure it's ordered in time for closing.
A quick document checklist
- Declaration or CC&Rs, bylaws, rules and architectural guidelines
- Current budget and recent financial statements
- Reserve study and current reserve balance
- Board meeting minutes, at least the past 12 months
- Master insurance policy summary and deductible
- Any current or planned special assessments
- Pending or recent litigation
- Rental restrictions and any proposed amendments
- Resale or estoppel certificate and transfer fees
Reviewing a seller's disclosure too? See how to read a seller's disclosure.
Frequently asked questions
When do I get HOA documents when buying a home?
It depends on your state and your contract. Some states require sellers or associations to deliver certain documents and give buyers a review period with a right to cancel. Ask your agent what applies and build review time into your contract.
What is an HOA reserve study?
It's a report that estimates the remaining life and replacement cost of major shared components, like roofs and paving, and how much the association should save each year to pay for them.
Can an HOA raise dues or charge special assessments after I buy?
Generally yes, within the limits of the governing documents and state law. Reviewing the budget, reserves and meeting minutes helps you judge how likely increases are.
Do I need my own insurance if the condo has a master policy?
Usually. Most condo owners carry their own policy for belongings, liability, loss assessment and whatever part of the unit the master policy doesn't cover. A licensed insurance agent can match it to the master policy.
This article is general information, not legal advice. Association documents, disclosure rules, review periods and rescission rights vary by state and community. Consider having a real estate attorney review the documents for a significant purchase.
