What follows are our general observations and opinions. This is not legal advice, it is not a definitive statement of California law, and every situation depends on its own facts.
When you buy a condominium in Los Angeles you are buying two things: a unit, and a membership in a corporation that can assess you, sue you, restrict what you do with your own walls, and hand you a bill for a building problem you had nothing to do with. The HOA document package is where that second purchase is described, and our view is that the contingency period is the only real chance you get to read it while you can still walk away.
In practice most buyers receive several hundred pages a few days into escrow, skim the CC&Rs, and waive. We understand why — the package arrives in the middle of inspections and loan conditions, and it is written to be unreadable. But almost every unpleasant surprise we see from condo buyers was disclosed somewhere in that stack.
What the Seller Has to Give You
California’s condominium regime is governed principally by the Davis-Stirling Common Interest Development Act. Our reading of it is that a seller of a unit in a common interest development must provide a defined set of association documents to the prospective buyer, and that the association is obliged to make them available to the seller for that purpose, generally at a cost it may pass on.
The package typically includes the governing documents, the association’s current budget and reserve study summary, the most recent financial statements, a statement of assessments and any delinquency owed on the unit, notice of any change in assessments, minutes of recent board meetings, and disclosure of pending litigation involving the association. If something on that list is missing, our view is that the right response is to ask for it in writing and to treat its absence as a reason to extend rather than to waive.
The Documents We Read First
Not all of the package carries equal weight. Given a limited window, this is the order we would work in:
- The reserve study. This is the single most predictive document in the package. It states what the major components cost to replace, when they are due, and how much the association has actually set aside. A badly underfunded reserve on a building with an aging roof, elevator or plumbing system is a special assessment waiting to be scheduled.
- Board minutes, twelve months of them. Minutes are where problems appear before they appear anywhere else — recurring leaks, a contested vendor bid, an insurance renewal that came back much higher, an owner dispute heading somewhere. They are the least polished document you will receive and usually the most honest.
- Litigation disclosure and the insurance summary. Pending construction defect litigation is a material fact and can also affect a buyer’s ability to finance. Read the deductible on the master policy, particularly for water damage, and check what it leaves to the individual owner.
- The CC&Rs and rules on use. Rental restrictions and minimum lease terms matter enormously if the plan is ever to lease the unit. So do pet limits, short-term rental prohibitions, and rules on hard-surface flooring, which are a common source of neighbour disputes in older LA conversions.
- The assessment and delinquency statement. Both the amount owed on this unit and the association’s overall delinquency rate. Widespread arrears push costs onto the owners who do pay.
Exclusive Use Common Area — the Line That Causes the Fights
The distinction that produces more disputes than any other is between the unit, the common area, and the exclusive use common area — the balcony, the patio, the parking space, sometimes the windows. Maintenance, repair and replacement of each may sit with a different party, and the Davis-Stirling default allocation can be varied by the CC&Rs, so the governing documents have to be read rather than assumed.
This is where water intrusion and mold claims in condominiums become genuinely difficult. When the leak originates in a common area pipe and damages a unit, the questions of who repairs the pipe, who repairs the drywall, whose insurance responds and who bears the deductible can each land differently. We have written separately about mold discovered after closing, and the condominium version of that problem is consistently the hardest one.
Los Angeles Specifics Worth Checking
Several things come up here more than elsewhere. Buildings converted from apartments — common across Hollywood, Koreatown and the older Westside stock — often carry plumbing and electrical systems considerably older than the conversion date implies. Balcony and elevated element inspection requirements have added a real and recurring cost item for many associations, and whether an association has completed those inspections and funded the resulting work is worth asking directly. Soft-story seismic retrofit obligations affect a great many older buildings in the city, and an unfunded retrofit is a large future assessment. And where the building is in a rent-stabilized jurisdiction, restrictions on removing an existing tenant are a separate matter from anything the CC&Rs say.
Do Not Waive on a Promise
If the package is incomplete, if the minutes reference a problem that is not otherwise disclosed, or if the reserve position looks thin against the age of the building, our view is that the answer is an extension in writing rather than a verbal assurance from anyone. Once the contingency is waived the leverage is gone, and the buyer generally owns the assessment that arrives three months later.
Fees
We review HOA document packages on a flat-fee or hourly basis rather than on a contingency — this is transactional work, and we can usually quote a flat fee once we know the size of the package and the deadline. If a matter later becomes a disclosure dispute after closing, that is different work and the fee arrangement is set out separately in writing.
If you are in escrow on a Los Angeles condominium and the HOA package has just landed, we are glad to read it with you before the contingency runs. Call us at (310) 556-9692.
Related reading: our real estate resource page, along with what sellers must disclose on the Transfer Disclosure Statement — the seller-side counterpart to this package; natural hazard disclosure in Los Angeles — fire, flood and quake zones and what the report does not tell you; and what to do when a seller did not disclose mold — the post-closing route when something material was left out.
This article reflects our general views and opinions rather than legal advice, and it is not a definitive statement of California law. Reading it does not create an attorney-client relationship between you and our firm. Every matter turns on its own facts, and we would encourage you to speak with a lawyer about yours.
TALK TO A LOS ANGELES ATTORNEY
Tell us what is happening and we will get back to you. Your consultation is free, and we will tell you honestly whether we think you have a case worth pursuing.
