Buying a townhouse or condominium: What should you consider?

By: Dian Hymer

June 26, 2000

Tired of mowing the lawn? Ready for a low-maintenance lifestyle? Perhaps it's time to consider buying a condominium or townhouse. But before forging ahead, consider the following.

When you buy a single family detached residence, you become the exclusive owner of the structure and the property it's located on. The property boundaries distinguish what is yours from what belongs to your neighbors.

When you purchase an attached dwelling such as a townhouse or condominium, you obtain exclusive ownership rights to the interior space of your particular unit. But, you own the common area-grounds, fences, shared walls and facilities-with other owners in the condo or townhouse (also called a planned unit development or PUD).

As a condo or townhouse owner, you automatically become a part of a homeowner's association to which you pay dues, usually on a monthly basis. Homeowner's dues usually cover the cost of maintaining and insuring the common areas. Precisely what the homeowner's dues cover varies from one complex to the next, so make sure you find out what's covered before buying. The dues may also fund a reserve account to cover major expenses like resurfacing tennis courts or replacing homeowner's roofs.

Buying a condominium involves some of the same issues that are involved in buying a detached home. The unit should minimally meet your housing needs, be within your price range, be reasonably priced and be thoroughly inspected by a professional home inspector. But additional issues come into play when you buy into a PUD.

FIRST-TIME TIP: Attached housing projects are governed by Covenants, Conditions and Restrictions (CC&Rs) that restrict ownership rights. For example, CC&Rs may include restrictions on remodeling, parking and renting. Some CC&Rs prohibit pets. Make sure that you read and understand the CC&Rs before you buy. If the CC&Rs are cumbersome and incomprehensible, hire an attorney with expertise in PUDs to review the CC&Rs for you.

Be sure to read the bylaws and articles of incorporation of the Home Owner's Association and review a current financial statement. It's also advisable to obtain copies of the minutes from the last several homeowners association meetings.

Find out if the homeowner's association is involved in any litigation. Perhaps you've heard horror stories about condo owners suing the developer for shoddy construction. If a condo seems under priced, there may be a reason for this. If the association loses the case and does not have sufficient reserves, the condo owners might have to pay to repair the defects.

One of the best ways to get information about a PUD is to talk with current owners. Be sure to ask what they like and dislike about living there. How is the soundproofing? Are there any parking problems? Is there ample storage space? Are the current owners satisfied with the homeowner association management?

A condo that is unique should raise a red flag in your mind. One buyer paid top price for a condo that had an enclosed balcony that was furnished as a home office. Years later, the association management began strictly enforcing the CC&Rs. It was only then that the buyer discovered that the balcony renovation was in violation of the CC&Rs. The CC&Rs clearly stated that the only furniture allowed on the decks was patio furniture. The lack of a home office diminished the value of the condo significantly because it was a small studio unit. When the buyer sold, she sold at a loss.

THE CLOSING: In terms of resale, a 1- or 2-bedroom condo is a better investment than a studio.

Dian Hymer is author of "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.