Buying a Costa Rica condo in a broke or underfunded Home Owner Association?
IVO HENFLING | MAY 3, 2014
In Costa Rica real estate, the condominium phenomenon was unheard of before 2005. In today’s Costa Rica real estate market, over 80% of the properties on the market are condominiums. Purchasing a Costa Rica condo may have a lot of advantages but that is not what today’s blog is all about. Many buyers do not realize that they purchase along with the condominium unit, apartment, house or lot, a percentage in the common areas and also an obligation in the maintenance of those common areas.
When GoDutch Realty is involved in a purchase, and we have an accepted offer between buy and seller, our buyer’s attorney will always write up an option to purchase – sale agreement on a Costa Rica condo stating the following: Condominium Balance Sheet. The SELLER shall provide to the BUYER within seven business days of the execution of this agreement a copy of the Condominium balance sheet for the year ending in 2013 and the condominium operational budget for 2014.
In a recent negotiation, the seller’s attorney rejected our proposed option agreement by saying that the seller could not depend on a third party and please change the text into: Condominium Balance Sheet: The SELLER shall perform its best efforts to provide to the BUYER within a reasonable time of execution of this agreement a copy of the Condominium balance sheet for the year ending in 2013 and the condominium operational budget for 2014.
Is there enough money to maintain the pool in good shape?
I don’t care how they formulate an obligation to show that the condominium doesn’t have a huge loss, and if it is a third party or the pope who will deliver the documents needed. But as a buyer’s agent I want to make very sure that we are dealing with a healthy Costa Rica Home Owner Association BEFORE the earnest money hits the escrow account and my buyer can walk away from the offer if there is not proof of that.
Many Home Owner Associations in Costa Rica are underfunded. Divorces or financial problems can be good reasons for condo owners to run late in their monthly HOA payments and smaller condominiums and gated communities are affected much easier than the large communities.
Most HOA’s in Costa Rica do not make any reserve funds for large projects like painting the buildings or adding an amenity and when the time for such a project comes, they are paid for by special assessment. The timing of your condo purchase is eminent or you need to take the cost of this assessment into account in your purchase price.
The HOA is responsible for the maintenance of the common areas
No matter who am I representing in a purchase of a condominium in Costa Rica, I don’t want any buyer of Costa Rica real estate to end up in a horrible scenario where the buyer may get stuck with a large assessment from the Home Owner Association and not even find out until it is too late. You can include in your offer, a due diligence period that you can use to collect all the necessary documents that show that the condominium or gated community you are buying into, has a perfectly healthy administration.
The California Department of Real Estate (DRE) and many other real estate organizations have in the past issued a consumer warning as a result of the growing number of home owners associations (HOAs) that do not have sufficient funds or reserves to adequately maintain the common areas in the housing developments for which the HOA is responsible, which shows that the problem not only appears in Costa Rica.
Before you purchase Costa Rica real estate in a condominium, check the HOA is healthy so you will not run into financial problems later. Contact us now if you are in the market to purchase of a Costa Rica condo.
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I DO want to remind our readers that we appreciate any referrals you can send us. I know you all meet people on the plane, in the supermarket, at yoga, at the gym, at the Blooms ladies club, at the potluck organized by your community. Please remember the GoDutch Realty agents when you talk about your home in Costa Rica, when you meet someone who wants to purchase one, we appreciate it.