Attached homes: condos and townhomes

The listing’s label describes the building. The association’s declaration describes what you actually own. In a condominium you typically own the space inside your unit plus a shared interest in the common elements, which usually include the roof, the exterior walls and the grounds. A townhome may be owned exactly the same way, or it may come with the land beneath it and the structure on it, leaving the association responsible for much less.

That difference decides who repairs the roof, who insures what, and whether a lender treats the purchase as a condominium. Two attached homes that look identical from the street can differ on all three. The declaration, and the map or plat recorded with it, are where the answer is.

Monthly dues pay the association’s running costs, and a well-run association also sets money aside in reserves for the large, predictable expenses: roofs, paving, siding, boilers, and elevators where there are any. A reserve study estimates what those will cost and when. Comparing the study with the actual reserve balance shows whether the association is saving at the pace its own plan calls for.

When reserves fall short of a bill, the association can levy a special assessment: a charge to every owner, on top of dues, to cover it. Ask whether one has been approved or is under discussion. Board minutes are often where it first appears, well before any owner receives a notice.

Low dues are not automatically good news. They can mean an efficient association or one that is not saving, and the budget and the reserve study are what tell the two apart. Some associations also charge a transfer fee or a capital contribution when a unit sells, and the documents say whether this one does.

The association carries a master insurance policy on what it is responsible for, and what that covers varies. Some master policies cover the building shell only; others extend to fixtures and finishes inside the units. Your own policy, usually called an HO-6, is written to fill the gap: the interior the master policy leaves out, your belongings, your liability, and loss assessment coverage, which can pay your share of an assessment that follows a covered loss, such as the master policy’s deductible, up to the policy’s limit.

The deductible is the number to find. When the association makes a claim, its deductible can be charged back to owners under the declaration, and on the Front Range, where hail claims are common, some master policies carry a separate deductible for wind and hail. Read the declaration and the master policy summary together, and ask your insurer to write the HO-6 against both.

Colorado’s standard residential contract, promulgated by the Real Estate Commission, sets a deadline for the seller to deliver the association’s documents and a later deadline by which the buyer can terminate if not satisfied with them. It is a contract date like any other, and it passes whether or not anybody read the packet.

Ask for the declaration, bylaws and rules; the current budget and recent financial statements; the reserve study if there is one; minutes of recent owner and board meetings; the insurance policies; and any notice of pending litigation. Ask directly about construction-defect claims, past or pending, because they can affect the building’s repairs, the association’s insurance, and whether a lender will finance a unit.

Financing is where a condominium differs most from a house. A VA loan on a condominium requires the project to be VA-approved, and an FHA loan needs an FHA-approved project or, in some projects, a single-unit approval, so the building has to qualify as well as the buyer. Conventional loans carry their own review of the project, where pending litigation or a high share of owners behind on dues can matter. If you plan to use one of these loans, ask your lender to check the specific project early, before the Association Documents Termination Deadline rather than at the appraisal.