Ask Cora

Hey Cora, I want to buy a condo but there are things that I will want to do with it, like remodel. What exactly are the limitations on that. Signed Condo Maximum!

Dear Max, Let’s see, where to start... so many things... so little time. Okay, let’s start with the “type” of condo you are buying. There are townhomes, condominiums and site condos. These are all different and their legal descriptions are different.

Townhome – usually means that you own the ground that it sits on. Not a lot, just the perimeter of the foundation and nothing else.

Condominium - means the ground that it sits on is “common element” that means everyone in the condo association owns it. So your crawl space is actually owned by everyone! This is why many of them don’t allow you to store things in your crawl space.

Site Condo – means you own the “air around the building”. Which sounds strange, but it does keep the dues per month down.

Okay now that we have established that, this is when you choose what type you want. So if you go with just a standard condominium, we have other things to discuss.

1) What do the dues cover. Usually, and I know I am going to use that term a lot in this article, because they are all written differently, so usually, the dues cover, water, sewer, trash, snow plowing, lawn care, insurance (structure only, not interior) and reserves for re-roofing, re-paving, re-painting etc.

2) Are there proper funds in the reserve account. The reserve account is critical. If this is not managed properly, it will create a huge problem for everyone of the owners. Years ago, some of the older associations had managers that actually embezzled from these reserve accounts and left the owners with nothing to make repairs. These reserve funds are also essential for being able to sell condominiums with government backed loans like FHA, VA and Conventional. These programs require that reserves meet or exceed the estimated replacements costs. As a buyer, you will receive a document that explains all the costs, where everything has gone, what is in savings (reserve) and how long it’s estimated life of each item will be before replacement.

3) What is the Owners to Tenant ratio? You may think this should have nothing to do with owning a condo, but it does. Those same loan programs, FHA, VA, Conventional and even Alaska Housing, have requirements for how many tenants are in the building. Some require 51% others 80% owner occupancy. But the management company that oversees the condo dues, insurance and maintenance, must also keep track of who is living there, owner or ten- ant. There is a document required by lenders that asks several questions of the management company about the percentage of ownership. If these numbers are off, a buyer cannot get financing. There is a list of condo associations on a web site that shows which associations are in compliance and which are not. Yes, it’s that serious.

4) Do all units use the same Heating System. Some condominium associations have one heating system for the entire building. In this case, the natural gas bill is included in the dues. This also means that the heating system is covered in the reserve account to be replaced and to have regular maintenance performed. This can be good for people who are on a fixed income, because their bills should remain the same for them and major components are covered in the dues, like roofs, sewer systems, heating systems.

There are a few other things to take into consideration as well. You will read about these terms in the public offering statement that you will receive for your review that has all the financial information as well as rules etc.

1) Common Element: This is parts of the association that is owned by everyone. So, let’s use the parking lot for example, would be a common element. If there is a central laundry room, that too is common element. Hallways, shared garages, exterior walkways, all common elements.

2) Limited Common Element: These are areas that are limited to the unit owners personal use. Say a small area outside, like a back yard, this would be limited common area, or maybe a garage stall with a small storage area, again limited common area. You can store your things in your storage area and it’s limited to your use only. The public offering statement will spell out these areas for you.

So, let’s talk about what you can do. Usually, there’s that word again, you can do what you want inside, it’s referred to as “paint to paint”. You can change out cabinets, carpet, appliances, repaint. Moving walls may not be an option depending on the structure. If the units are side by side, it’s probably okay to move non structural walls, if they are “apartment” style, probably not okay.

Another thing to keep in mind when remodeling a condo is plumbing leaks, you may cause damage to another unit. There is also risk of disturbing the firewalls that separate the units. Your plans would have to be reviewed by the condominium board for approval and if you are in the Municipality of Anchorage, you may need a building permit.

In other works, yes, depending on what you want to do, get approval and go for it. When you are ready to purchase that condo, give me a call, I would love to help you find just the right place.

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