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

An underfunded reserve means the association lacks sufficient savings for future major repairs, making special assessments far more likely when roofs, elevators, or other components need replacement.

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

The master policy covers common elements, the building structure, and association liability, while individual owners need separate HO-6 policies for personal property and unit-specific improvements.

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

'Bare walls in' means the master policy covers from the exterior walls inward to unfinished interior surfaces only, leaving fixtures, flooring, cabinetry, and owner improvements uncovered.

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

If most association income is directed toward operations with little going to reserves, the association may not be accumulating sufficient savings for future capital expenditures.

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

Rental restrictions such as lease approval requirements, minimum lease terms, or rental caps limiting the percentage of units that may be rented are typically codified in the Declaration or Bylaws.

(CCS) Certified Condominium Specialist Practice Test

(CCS) Certified Condominium Specialist Practice Test

CCS Condominium Document Review & Due Diligence 3