If you have been involved in the resale of a unit in a condominium or planned community (and who hasn’t?), then you are familiar with the necessity of buyer’s receipt of a certificate of resale.
Paragraph 16 of the Agreement of Sale reflects Pennsylvania law and makes clear that the agreement is terminable by buyer for up to five days after receipt, not only of the certificate of resale but of bylaws and rules and regulations.
Agents understand the importance of obtaining certificates of resale in order to limit the buyer’s opportunity to terminate, and thus the emphasis has been on obtaining and delivering the appropriate documents. Many, however, fail to appreciate the reason behind the law’s requirement. The recent condominium collapse and resultant deaths in Florida bring the topic into focus. Certificates of resale in most states, including Pennsylvania, include a statement of the capital expenditures proposed by the association for the immediate and near future. A statement of the amount of reserves available for special projects is also included. Thus, if a purchaser took note of millions of dollars of proposed expenses and a reserve account that’s empty, that purchaser just might question how those expenses will be paid. No doubt a purchaser facing a potential special assessment of hundreds of thousands of dollars would think twice before committing. And this is why the law gives buyers the right to terminate within five days of receipt of this critical information.
A buyer moving into planned community or condominium stakes his or her economic wellbeing, in part, on the economic health of the condominium/community. Some communities budget by imposing nominal capital fees annually with the idea of building a fund from which to pay future major projects. Others choose not to amass funds over time and impose special assessments each time a major project is undertaken. While this is an oversimplification, it illustrates the value of reviewing the condo’s/community’s financial documents as one would review matters of title. While lenders won’t finance a property with title problems, they do not, in my experience, review certificates. This falls on the buyer.
As an agent representing a buyer of a unit in a condominium or planned community, you should emphasize why the information is provided and what it is the buyer should consider. Advise your buyers to question an association if there are proposed future expenditures that are not explained in detail. Such questions may lead to the discovery of issues worth of exploring.