New 2009 construction, two condo building. How are HOA fees established? How is coverage determined?

Asked by Tootsie, 94105 Tue May 26, 2009

I am preparing to purchase a new construction (2009) condo in San Francisco. There are only two condos in this building. HOA fees were established as $200 for the downstairs and $300 for the upstairs. It's a new building, so how were these payments established? It's first time on market, so both condos will be newly occupied for the first time. Do we as the new owners have to find our own insurance and write the terms of our HOA contract and coverage? If so, how is that typically structured?

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Jason Chapin, , San Francisco, CA
Wed May 27, 2009
Hi Tootsie,

During condo subdivision an HOA has to be created. It's Articles of Incorporation are filed with the Secretary of State. CC&R's should be drafted by the developer and recorded with the county before you agree to buy.

It sounds like the developer/seller has created an operating budget already, which will include common utilities, hazard insurance for the building, et cetera. The share will likely be divided by some function of size. It sounds like the total budgeted liability for the building is $500. The upper unit is probably larger than the lower unit by some total such that after considering their relative portions it pays 3/5ths of the budget liability. This budget is probably a bare-bones minimum and likely requires self management of the building, HOA and maintenance.

The HOA is created during condo subdivision, so insurance, CC&R's, bylaws and other governing documents should exist before you agree to purchase. It is possible, though, that they are not yet complete or haven't been recorded. Regardless, you shouldn't have to draft these things.

You should definitely be using a real estate agent through this process, though, and you're best served using your own agent - not the seller's. As new construction there are additional aspects to this purchase you need to be aware of. Your agent should be guiding through all of these in addition to the questions you asked.

By the way, be sure to save all of the documents you receive. The governing docs are required in order to sell and are costly to produce if you lose them. They'll be helpful while developing a working relationship with the other owner, too. Despite buying a condo your responsibilities will more closely resemble that of a detached homeowner.

If you'd like more detailed guidance as you sort through this process, please call or email.

Good luck!

Jason Chapin
McGuire Urban Bay
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Tony Abad, Agent, El Cajon, CA
Wed May 27, 2009
The builder forms the Board of directors with company people. It has a management company that it uses to draft all of the governing documents.

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