Buying a condo? Prevent post-closing surprises with the FAR CD-2 Condo Disclosure Statement

Are you or your client buying a condo? Often, one crucial document is missed as part of the sales contract package.

Though the standard Condominium Association Addendum is commonly used for disclosing maintenance fees, special assessments, etc.,many real estate practitioners often overlook the FAR CD-2 Condominium Disclosure Statement.  This trusty document can protect your buyer (and you) from an unexpected post-closing discovery.

This document is completed by the seller and discloses many pertinent details about the Condominium Association  that may materially affect the buyer’s decision to purchase the property. Here are a few sample questions from the Condo Disclosure Statement  (followed by real world files gone foul in our world) that are not addressed on the Property Disclosure Form,  Condominium Association Addendum or  the standard Estoppel Request:

• Are you aware of any proposed changes to the condominium documents? Changes can range from pool hours, change of management companies to assignment of parking spaces. 
  
• Are you aware of any current or proposed resale or lease restrictions? A recent buyer/investor found out through his own due diligence that they would soon require all new tenants to have a minimum 2 year lease. The issue was  being tossed around on the Minutes of HOA meetings, but had not been voted on yet. His intentions were to lease for 1 year and then occupy for his own use, so he cancelled the contract.
• Are you aware of of existing, pending or proposed legal actions, claims, special assessments or municipal service taxing  affecting the property? We have seen a claim by a government body such as the Miami Dade Community Development District (“CDD”) impose as much as $10,000 on each unit in a condo. This was not disclosed by the seller and created buyer/seller litigation over the matter. A settlement was reached, but only after substantial legal expenses for both parties. 
• Are you aware of any proposed increases in assessments or maintenance fees affecting the property? A recent purchased ended up in mediation over the seller’s failure to disclose an upcoming special assessment for $65,000 per unit that had been announced in multiple issues of the condo newsletter prior to the Board Vote. 
• Have any local, state  or federal authorities notified you that repairs, alterations or corrections of the property are required? Older buildings require a municipal 40 year re-certification in order to maintain their Certificate of Occupancy. As Florida’s  condo buildings mature, updating the buildings to code can often lead to hefty per unit assessments to reach compliance. 
• Does the Association maintain full replacement value flood insurance on portions of the condominium? This issue usually arises after storm/flood damage. If the lobby becomes flooded, does the current policy cover full replacement value or will owners be required to gap the difference? 

Real estate practitioners should use the CD-2 form for all condo purchases on both the seller and buyer side to avoid future disputes. You can download a copy of the form at the following link FAR CD-2 Condominium Disclosure Statement

Here is a sample of the first page of the Condominium Disclosure Statement :

In addition, buyers should always obtain and review a copy of the following documents within 3 days of the effective date of the contract: 1. Condominium declaration 2. Articles of incorporation 3. Bylaws 4. Condo rules 5. Year end financial statements 6. Frequently asked questions and answers 7. Minutes of last three Condo Board meetings

Please contact us at [email protected] or 305-271-0100 x 701 for more information or if you need a no-obligation, contract review.