Miami Condo Market: Ownership Issues
Condominium ownership is becoming quite popular throughout the United States, especially, in big cities like Miami. It seems as if developments in the Miami condo market might be a win-win situation for everyone. For homeowners in particular, condos can be a very efficient and sometimes luxurious way of enjoying an urban lifestyle. For condo builders, the Miami condo market can embody a strong return on investment, at least before prices started dropping a few months back. And in the case of high rise condominium construction, less property has to be purchased so the profit margin can be even heftier.
Condominiums come in all shapes and flavors. It seems that the newest breed is found in urban areas like Miami. In part, this is due to the trend towards urban renewal and redevelopment that is taking place in many regions around the country. When talking about condominiums, not only do I refer to those developments that follow a condominium form of ownership, but also similar kinds of legal entities such as homeowners associations (HOAs).
If unit owners are responsible for the finished walls in addition to owning the interior living space, the HOA is responsible for the areas beyond the finished walls—typically the structures, the plumbing, the common sewage lines, and anything else common that is for the benefit of the association including pathways, recreation facilities, swimming pools, and tennis courts. HOAs may have common areas and limited common areas. A common area might be something like what was described above: a park, an internal street, a pool. A limited common area might be a part of the lawn that’s fenced off for the use of a particular unit owner.
These are general observations in the Miami condo market scene. Before purchase a condo unit one must read the master deed, the by-laws and every other legal document in order to find out what is and what is not to own. This can make a substantial difference. For example, some coastal condominiums in Miami have docks for the unit owners. A unit owner needs to understand who will own the dock that he or she will be using. This issue is important for resale purposes, maintenance issues (which can be very costly in this example) and riparian ownership concerns.
The success of the HOA is directly correlated with the caliber of the members. If the HOA’s board of directors is functioning properly and has good legal counsel, then the entire community may be an exciting, desirable place to call home. On the other hand, if the entire HOA is falling apart because nobody wants to volunteer, or it isn’t properly collecting the monthly assessments from the unit owners, then the community probably would not be a desirable place to live, and people would most likely not continue on living there. Another concern is the extent to which the condominium is owner occupied. If most owners rent the units out, they may be collectively less concerned about day to day issues than if it is largely or entirely owner occupied.
Hence, when purchasing a condo, you can’t just look at the overall quality of the construction but also look at the condominium records and documents. In reviewing the HOA documents, one must find out if they permit special assessments for one-time large expenditures. The HOA should be able to render special assessments if problems arise, such as hurricane damages, and the like. Watch for association documents that unreasonably restrict the right to special assessment. While this restriction might seem desirable, in reality an inability to special assessment can ruin a condominium development.
In addition to a thorough document review, talk to people who own units. Probe the things that they have to say about living in the condominium complex. Look around the development as well to see if it appears properly maintained.
There is no getting around the fact that due diligence in the case of a condominium purchase requires an examination of the HOA records and legal documents. Examine them and ask questions before purchasing.
Earl Juanico www.miamirealestateinc.com
