Real Estate Guide

Home Ownership - Questions and Answers
'Condos and Homeowner Associations'

• How do I figure out the homeowners association?
• How are fees and assessments figured in a homeowners association?
• Do condos have to be made accessible to the disabled?
• Can condos ban smoking?
• Can a condo association ban nudity?
• Are condos a good investment?
• Are condominiums risky to buy?
• Are one-bedroom condominiums a good investment?
• Where do I get information on condo association laws?
• Where do I get information on condos?

How do I figure out the homeowners association?

Learn everything you can about the homeowners association before you buy into a development governed by one.

The association's financial, political and legal conditions are very important to your investment and quality of life:

• When run properly, homeowners associations maintain the common grounds and keep civility in the complex. If you follow the rules, the association should not intrude on your privacy or cost you too much in association dues.
• Poorly managed associations can drag down property values and make living there difficult for residents.

Start by studying the associations covenants, codes and restrictions, or CC&Rs, and find out if you can live by them. For example, if the rules prohibit loud music after a certain hour and you like to play your CDs late at night, this may not be the place for you. Don't move in thinking you can get away with violating the rules or change them later because you may find yourself in turmoil with determined neighbors firmly in control of the association board.

Find out all you can about the association's finances. Beyond reviewing the budget, talk to the association treasurer and find out if dues are expected to increase and if any special assessments are planned. Ask if special inspections have revealed problems with roofs or plumbing that may cause a dues hike or special assessment later on.

Call and meet with the association president. If you are the type of person who despises intrusions into your private life and the president seems more interested in gossip about the residents than maintaining the property, this may not be the right condo complex for you.

Speak with residents to get their views on the association's finances, its property manager, how it operates and any politics.

Associations are volunteer organizations with elected boards, like a mini- government, so politics can enter the picture and spoil a good thing.

Lastly, take some time to understand how homeowners associations are organized and how they conduct business. Like all real estate investments, the more you know the better off you are.

See also:

• 10 Questions to Ask Your Condo Board Before You Buy

How are fees and assessments figured in a homeowners association

Homeowners association fees are considered personal living expenses and are not tax-deductible. If, however, an association has a special assessment to make one or more capital improvements, condo owners may be able to add the expense to their cost basis.

Cost basis is a term for the money an owner spends for permanent improvements throughout their time in the home and is used to reduce eventual capital gains taxes when the property is sold. For example, if the association puts a new roof on a building, the expense could be considered part of a condo owner's cost basis only if they lived directly underneath it.

Overall improvements to common areas, such as the installation of a swimming pool, need to be considered on a case-by-case basis but most can be included in the cost basis of any owner who can show their home directly benefits from the work.

See also:

• To find out more about how the IRS views condo association fees, look to IRS Publication 17, "Your Federal Income Tax which includes a section on condos. Order a free copy by calling (800) TAX-FORM.
• What are Capital Gains?

• 10 Questions to Ask Your Condo Board Before You Buy

Do condos have to be made accessible to the disabled?

The 1990 Americans with Disabilities Act does not require strictly residential apartments and single-family homes to be made accessible. But all new construction of public accommodations or commercial projects (such as a government building or a shopping mall) must be accessible. New multi-family construction also falls into this category.

In all states, the Federal Fair Housing Act provides protection against discrimination for people with physical or mental disabilities. Discrimination includes the refusal to make reasonable modifications to buildings that aren't accessible to the disabled.

See ►  ADA Regulations and Technical Assistance Materials.

Can condos ban smoking?

A homeowners association's board of directors can restrict smoking if it applies to indoor common spaces such as hallways or recreation rooms. Outdoor spaces are a different story, say legal experts. Any restriction would probably hinge on local laws (i.e. if a city banned smoking outdoors, a homeowners association probably could restrict smoking in its outdoor spaces). Typical covenants, codes and restrictions, or CC&Rs, which govern condo associations, give the board authority to make and enforce reasonable rules for the use of common property. CC&Rs do apply to interior spaces owned by smokers themselves.

• Resources ►  Where do I get information on Condo Association laws?

Can a condo association ban nudity?

Could you sunbathe in the nude on your own balcony? Not necessarily. In a condominium development, a balcony is not considered private property but common property assigned to your exclusive use - but a common area nonetheless.

Covenants, codes and restrictions, or CC&Rs, usually spell out what activities can and cannot be conducted on common property. Some associations prevent people from barbecuing on their balconies or hanging large plants from the railings.

However, the larger issue of regulating personal conduct is not so clear-cut. It literally depends on what side of the fence you're on. If the sunbather can be seen from a public vantage point -- not by someone who must climb a tree or peer through binoculars -- then the rule probably would be considered reasonable, say legal experts.

Incidentally, there are places where nudity is tolerated but again, only out of public view.

Are condos a good investment?

See ► Real Estate Guide: Investing in Real Estate (Condos, Apartments & Single-Family Homes) - Are condos a good investment?

Are condominiums risky to buy?

See ►  Real Estate Guide: Investing In Real Estate (Condominiums & Townhomes) - Are condominiums a good investment?

Are one-bedroom condominiums a good investment?

See ►  Real Estate Guide: Investing in Real Estate (Condos, Apartments & Single-Family Homes) - Are one bedroom condos a good investment?

Where do I get information on condos?

See ► Real Estate Guide: Whom To Contact (Resources) - Where do I get information on Condos.

Where do I get information on condo association laws?

See ► Real Estate Guide: Whom To Contact (Resources) - Where do I get information on Condominium Association Laws?