CCS Condominium Document Review & Due Diligence 3

Question 1

What is the primary concern for a buyer when a condominium association's reserve fund is significantly underfunded?

Accepted Answer

Owners face a higher likelihood of special assessments to fund major repairs and capital improvements

Answer

The association may lose its nonprofit tax-exempt status with the IRS

Answer

The property management contract is at risk of being terminated by the board

Answer

The association loses the ability to hold legally valid annual membership meetings

Question 2

What type of coverage does a condominium association's master insurance policy typically provide?

Accepted Answer

Coverage for common areas, the building structure, and general liability for the association

Answer

Coverage for personal property and improvements inside individual units

Answer

Individual liability coverage protecting each unit owner personally

Answer

Life and disability insurance for elected board members and officers

Question 3

What does 'bare walls in' coverage mean in a condominium master insurance policy?

Accepted Answer

The policy covers the structure and common areas but excludes interior fixtures and improvements within individual units

Answer

The policy only covers the land parcel and foundation slab

Answer

Coverage applies exclusively to damage to exterior-facing walls and windows

Answer

The policy carries no deductible when structural damage occurs

Question 4

When reviewing a condominium association's budget, what does a very high percentage of income allocated to operating expenses versus reserves suggest?

Accepted Answer

The association may be underinvesting in reserves, risking underfunding and future special assessments

Answer

The association is exceptionally well-managed and financially conservative

Answer

The property has minimal maintenance requirements due to its newer construction

Answer

The association recently completed all planned capital improvements ahead of schedule

Question 5

Which condominium document would a buyer review to determine whether restrictions exist on renting out the purchased unit?

Accepted Answer

The Declaration of Condominium or bylaws containing rental restriction provisions

Answer

The building's most recent fire department inspection report

Answer

The county property tax assessment and notice of valuation

Answer

The utility and drainage easement agreements recorded with the plat

Question 6

What does it mean if a condominium project has reached its 'rental cap'?

Accepted Answer

The maximum allowable percentage of units being rented has been reached, potentially restricting new rentals and affecting buyer financing options

Answer

The association has frozen monthly rental rates throughout the building

Answer

The property management company cannot execute any new lease agreements on behalf of owners

Answer

All non-owner-occupied units must immediately be converted to owner occupancy

Question 7

What is a 'material fact' that a CCS professional or seller must disclose in a condominium resale transaction?

Accepted Answer

Any known information that would significantly affect a buyer's decision to purchase or the price offered, such as pending special assessments or structural issues

Answer

The personal financial net worth of each current board member

Answer

The full maintenance history for every appliance in the unit over its lifetime

Answer

The association's complete list of past rule violation citations against all residents