Most buyers skim the association documents the night before a deadline. Amy spent years on the other side of those documents, and reads them the way a mechanic listens to an engine.
When you buy into a community with an association, you are buying two things: a home, and a share in a small organization that owns roofs, roads, boilers and a bank account. The home gets an inspection. The organization deserves one too.
Before she was a broker, Amy worked in association and property management in Beaver Creek. What follows is the order she reads things in, and what she is looking for.
Start with the timeline
Under Colorado’s standard purchase contract, the seller delivers the association documents by an agreed date and the buyer has until a separate deadline to review them and, if they are unsatisfactory, to terminate. Those dates are negotiated in the offer. Ask for enough time to actually read, and put the deadlines on your calendar the day you go under contract.
The declaration, bylaws and rules
The declaration, often called the covenants or CC&Rs, is the association’s constitution. Read it for the things that would change how you live:
- Use and rental restrictions. Are short-term rentals allowed? Is there a minimum lease term or a cap on the number of rented units?
- Pets, vehicles and exterior changes. Limits on animals, RVs, trailers, fencing, paint colors and solar.
- Maintenance boundaries. Who repairs windows, decks, roofs and the pipes inside the walls. The answer is not always what you would guess.
- Assessment powers. How dues can be raised, and what vote a special assessment requires.
Rules and regulations sit on top of the declaration and change more often. Make sure you have the current set.
The budget
A budget tells you what the association thinks next year will cost. Compare it with the prior year’s actual spending. Line items that jump, such as insurance, utilities or snow removal, often explain a dues increase before the board announces it. Look for the share of income that is being set aside for reserves rather than spent on operations.
The reserve study
This is the most important document most buyers never open. A reserve study lists every major component the association must eventually replace, estimates each one’s remaining life and cost, and compares the total with the money actually in the bank.
- When was it done? A study more than a few years old is describing a different economy.
- How funded is the association? A low percentage is not disqualifying, but it tells you special assessments are likely.
- What is coming due? Roofs, siding, elevators, boilers and paving in the next five years are the items that become assessments.
Mountain buildings carry components that city buildings do not: snowmelt systems, heated garages, pools and spas, shuttle vehicles. They are wonderful to have and expensive to replace.
Insurance
Ask for the master policy’s declarations page. Two numbers matter: what the policy covers inside your unit, since some stop at the bare walls, and the deductible. Deductibles on hail and wind claims have risen sharply across Colorado, and many associations can pass that deductible back to owners. Your own policy should include loss assessment coverage sized to match.
The minutes
Read at least a year of board minutes. They are where you find out what the board is worried about: a leak that keeps returning, a contractor dispute, a neighbor’s lawsuit, a dues increase that failed by one vote. Minutes are also the earliest warning of a special assessment, which is often discussed for months before it is levied.
The layers above your building
In resort communities and many newer Front Range neighborhoods, your building’s association is only the first layer. There may also be:
- A master association covering the whole community, with its own dues and design review board.
- A metropolitan district, a local government that built the roads, parks or water system and repays that debt through a property tax levy. This cost appears on your tax bill, not in your dues, so it is easy to miss.
- A transfer fee or assessment payable at closing, common in resort areas.
Add all of the layers together before comparing the cost of one home with another.
A short list of red flags
- No reserve study, or one the board has chosen not to fund
- Several special assessments in recent years
- A large share of owners behind on dues
- Pending litigation involving the association
- Minutes that are missing, or that stop abruptly
None of these is automatically a reason to walk away. Each is a reason to ask a direct question and wait for a direct answer.
Where to get help
Colorado’s HOA Information and Resource Center, part of the Division of Real Estate, publishes plain-language guidance for owners and buyers. For anything that turns on the wording of a document, ask a Colorado real estate attorney. This guide is general information, not legal advice.
If you would like a second pair of eyes on a set of documents, Amy is glad to look.