Why Due Diligence Matters

Condo due diligence provides insight into the financial and operational health of the building you're investing in. By thoroughly evaluating risks, buyers can make informed decisions and, if necessary, renegotiate contract terms before committing.

Key Questions to Ask the Building

Financial Health

• What is the balance of the operating and reserve accounts? This determines the building's ability to manage unexpected repairs or emergencies.
• What are the trends in common charge increases? A history of frequent increases might indicate financial instability.
• Are there any upcoming assessments? Understanding potential assessments helps buyers plan for future costs.

Building Maintenance

• What major repairs or capital improvements are planned? Large projects like façade repairs could significantly impact owner costs.
• How does the building comply with local laws? For example, compliance with Local Law 97 on energy efficiency ensures the building meets legal requirements.

Ownership and Governance

• What is the owner-occupancy rate? A higher owner-occupancy rate often indicates a more stable building community.
• Does the sponsor control the board? Sponsor control can limit transparency and decision-making.

Legal and Regulatory Issues

• Are there any pending lawsuits? Litigation can pose financial risks to future owners.
• Does the building comply with zoning and safety codes? Non-compliance could result in costly fines or retrofitting requirements.

Amenities and Policies

• What is included in the monthly common charges? Knowing covered services helps buyers plan their budgets.
• Are there restrictions on renovations or pets? Understanding building rules ensures the property fits your lifestyle.

Documents Attorneys Review

An experienced attorney will review these critical documents:

• Offering Plan and Amendments: Provides detailed disclosures about the building and its governance.
• Financial Statements: Offers insights into the building's fiscal health.
• Board Meeting Minutes: Highlights maintenance issues, disputes, or financial concerns.
• Compliance Reports: Ensures the building meets all legal safety and energy efficiency standards.

Negotiation Opportunities

If due diligence uncovers issues, buyers may renegotiate the contract. For example:

• Financial Concerns: Low reserves might warrant a lower purchase price or seller concessions.
• Structural Issues: Unresolved maintenance problems could lead to repair requests before closing.

Final Thoughts

Thorough due diligence ensures you're making a well-informed decision when purchasing a condo. Partner with an experienced broker and attorney to navigate this process smoothly.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult an attorney for guidance specific to your situation.