While our general Buyer's Guide applies to condo buyers, there are certain additional aspects to be aware of before purchasing a condominium in Vermont. They include:
- State Law Requirements
- Public Building Inspection Requirement
- Budget and Reserve Analysis
- Insurance Differences
- Closing Differences
• Condominiums in Vermont are governed by a State law known as the Vermont Common Interest Ownership Act.
• The law requires--among other things--that condo buyers be provided a set of the governing documents of the condominium, typically referred to as the "Condo Docs."
• The law also requires that the seller provide a "Resale Certificate." The law states what must be included in the certificate, but most importantly for a buyer it must include whether the seller has any outstanding dues or liens from the Association, and whether there are any ongoing lawsuits against the Association.
• The resale certificate should also have a copy of the Association's current budget, income and expense report, and reserve balance attached to it. If it does not, you should ask the seller to provide those items.
• The law allows a purchaser to terminate a contract within 5 days after receiving the resale certificate from the seller if the buyer is not satisfied with the information revealed in the documents.
• In addition to the distinct legal aspects of condominium purchases, buyers should also be aware of the practical differences.
Public Building Inspection Requirement
• Beginning in mid 2009, a new inspection requirement was imposed upon condo sellers.
• Sellers of condominiums in Vermont must now either produce a current Public Building Certificate of Occupancy or have their condo unit inspected by the Fire Marshall.
• Most condo buildings lack current Public Building Certificates of Occupancy so, in most cases, buyers will need to get a Fire Marshall's report before closing.
• The Fire Marshall's inspection applies current safety standards even if the condo was built at a time when different safety standards applied.
• It is very possible that condo sellers will need to bring their unit into compliance with current standards if the standards have changed since the condo was built.
• Many condo buyers look at the dues and simply evaluate whether the dues of the condominium association are high or low. This is a mistake.
• Condo buyers should not just look to see if the dues for the condominium are high or low relative to another condominium association in Vermont. Instead, condo buyers should determine what is and what is not included in the dues so the comparison is "apples to apples."
• Some associations provide a greater level of service for their owners while others choose to provide less and keep their dues lower.
• For instance, some condos include the maintenance of private decks in the dues while others exclude this cost. While the current dues may be lower in the Association that excludes deck maintenance, it is likely that over time you will end up paying a similar amount because you will need to perform your own maintenance and repairs on the deck.
• Another common mistake in evaluating dues is failing to analyze the reserves of the Association. Some associations choose to build up large reserves so that when major repairs are needed, such as replacing the roof or repaving, they do not need to levy a special assessment on all of the owners. Other associations prefer to keep their monthly dues low but when major repairs are needed they levy a potentially large special assessment against each unit owner.
• Lastly, many condominium associations in Vermont overpay for services, particularly self managed associations. If you are extremely interested in a condo unit in Vermont but think the dues are too high, you might still consider purchasing the unit and then taking on the association's current fiscal mismanagement to bring the costs and expenses better in line with market prices. However, you should note that it could take a large initial time investment to reform a mismanaged association.
• Unlike a single family home where the insurance policy covers both the contents and the structure, a condominium unit and its contents are covered by two separate insurance policies.
• The structure and most liability for a condominium unit in Vermont is covered by the Master Policy for the Association. The premium (cost) of the insurance is typically paid out of the dues of the association.
• The contents of a condominium are usually not covered by the Association's Master Policy in Vermont. Condo owners typically buy a "contents policy" to insure the items inside the condo.
• One item you may want to discuss with your insurance agent is whether to purchase additional coverage for improvements to the condo unit. In many policies the Master Policy will only cover the standard fixtures. For instance, if you upgrade the kitchen cabinets you may want to purchase a "betterments endorsement" so your upgraded cabinets would be covered in the event of a loss.
• For the most part, the closing process described in our Buyer's Guide will be the same for a condo in Vermont as it is for a single family home. However, there are a couple of slight differences:
• The first difference is that the condominium dues must be prorated. Most condo dues are paid monthly on the 1st similar to rent.
• If, for instance, the closing is on the 15th of the month and the seller paid the dues for the month on the 1st, then you as the buyer will need to reimburse the seller for the 15 days of dues paid in advance on your behalf.
• Before prorating the dues, however, the closing attorney will want to make sure that the data on the resale certificate is still true as it usually takes more than 30 days from the contract signing to the closing. It is possible that the resale certificate says the dues have been paid by the seller but if a new month started since the resale certificate was first issued then you need to make sure the seller paid those dues as well.
