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Wouldn’t you like something shiny and new? Well, in South Boston and other neighborhoods, there’s great deal of new condominium construction ongoing. That presents some great opportunities for new buyers – the ability to pick your own paint, floors, details, etc. – as well as warranties that you wouldn’t get outside new construction.
Of course, new projects aren’t perfect. They come with a great deal of unknowns. Making an offer before seeing the final product can be scary, and the property’s lack of history deprives you of some information. That much is obvious, though. Below are some less-obvious considerations when buying a newly constructed condominium.
In a brand new development, you won’t likely qualify for a traditional 30-year fixed mortgage. That’s because a new property is full of unknowns (owner occupancy rate, condo fee, comparative values, etc.). Consequently, the new condo unit won’t likely meet the underwriting standards for fixed-rate mortgages.
You’re not without options, however. You may apply for a variable-rate loan and plan to refinance later. In some cases, you may have more lending options if you approach the same bank that’s financing the project.
In the first year of ownership, new condominiums require some extra homework for property taxes. That’s because municipal tax assessors and collectors are slow to update the property’s information.
When you first move in, the condominium building may be listed with the city as a multifamily building, as though one person owned the whole thing. That will require the newly formed condo association to receive the tax bill and manually split it up among the owners by percentage interest. At a new condo’s closing, you will likely be required to sign an agreement to contribute.
More importantly, in cities that have a residential exemption (such as Boston), you will need to apply for it. The application window opens briefly once every year, and you won’t receive any discounts until you’ve successfully applied for it. That means that you’ll inevitably be paying a non-resident tax rate for at least some time. Just don’t miss the city’s application period. It’ll be an expensive oversight.
A new condo building will require a new condo association. That new condo association will require some capital reserve money. To raise the money, most new buyers will be required to make a capital contribution – usually equal to two months’ condo fees – at the closing.
Is that fair? Well, actually, it is. When you buy into an existing condo association, you indirectly buy a share of the existing condo reserve. If you’ve adequately reviewed the condo association in an existing development, then you’ve factored the reserves into your purchase price. In the new development, you’re starting with zero reserves.
I watch the homebuying shows, too. They give you three options, and you select one. In real-life homebuying, though, is it that easy? Well, of course not. It’s a complicated process with many decisions to make along the way.
When shopping, don’t let the excitement of homebuying distract you from simple ways to make the best-informed deal. There will always be risks in buying real estate; that’s unavoidable. However, by doing your homework, you can make an educated decision and avoid these common mistakes.
1. Not being specific. When you make your offer, don’t assume that you know what’s being included. If there are any must-have fixtures in the property, specify them in the offer. You don’t want to be disappointed when you move in to find the key light fixture missing. You also don’t want to start a bitter fight with the seller over furniture, appliances, or any built-ins.
2. Not reviewing the condo docs. When buying a condo, you’re buying into a joint enterprise with your neighbors. When investing in a company, you (hopefully) wouldn’t buy stake without doing any investigation. A condo is no different. When making the offer, require the seller to provide you with the condo information for your review. Take a good look at the condo budget and rules. Make note of any red flags – repeated litigation, collection difficulties, disorganized records, or abnormally high condo fees.
3. Not checking public information. While it may take some time at the computer, you can investigate the property and the sellers through some simple public records searches – city/town records, registry of deeds, etc. When making an offer, it may be helpful to know whether the seller is especially motivated or whether the property has a “history.”
4. Not investigating the surroundings. After thoroughly researching the home, why not look into the neighboring properties? Don’t assume that the grassy lot across the street will remain that way. Look into city records, news articles, zoning rules, property sales for your neighbors. Although you can’t prevent all development nearby forever, it would be nice to know that a high-rise is planned next door.
5. Not taking advantage of public homebuyer options. Most cities and towns offer something for homebuyers or developers. Many of these programs have specific eligibility rules – income limits, geographic zones, property types, and other criteria important to the municipality. For example, see Salem’s various opportunities. These offers may not apply to you, but it’s worth checking.
After working with you and becoming part of the community, I am proud to announce the launch of UrbanVillage Legal – a new kind of law office that’s about you and your neighborhood.
We’re here, as we’ve always been, to protect what’s important to you – your home, your condominium, your neighborhood – your urban village.
What’s in a name? “Urban village” commits us to your neighborhood and our mission. We’re focused on the most local of concerns that shape your daily life and long-term prosperity. Everything that we do starts with your home, protecting your most significant emotional and financial investment.
As any urban villager understands, however, your home isn’t independent of its surroundings. It’s integrally linked to the larger condominium association, neighborhood, and community.
For that reason, we have developed a unique concentration in matters that relate to you – the multifamily resident and investor.
How are we different? In order to meet your needs and accomplish our local mission, we have designed everything – our approachable environment, streamlined processes, transparent pricing, and on-demand communication – around your expectations.
First, we’re approachable and excited to work with you. Many of our clients have never worked with attorneys before. We want you to enjoy your interactions with us at every turn, and we avoid the pretense and aloof attitudes too common in legal services.
We’ve also developed streamlined, efficient processes for our work. If you’re seeking our counsel in a transaction or dispute, we know that you want us to cut the red tape – not create more of it. For real estate transactions, we know how to collaborate efficiently with your broker to make the sale hassle-free.
For all of our busy clients, we offer 24/7 access to your case online and on-demand. In one place, you’ll be able to track deadlines, see appointments, and review all case documents. The online portal not only keeps your case organized – it allows you a transparent look into our work and our billing.
What’s changing? With the launch of UrbanVillage Legal, we offer expanded services with a continued commitment to our shared local neighborhoods. Now, more of our services are available for flat rates – taking the guesswork out of your legal costs.
We’ll continue to offer advice and interesting stories at bostoncondolawyer.com, while publishing a weekly newsletter.
We’re as committed as every to our clients and are excited to announce the opening of UrbanVillage Legal, with expanded service offerings and improved client interface.
When you purchase a condo, you’re also buying a stake in the larger condo building or complex. More than anything else, your neighbors and the association will determine your happiness and return on investment.
While home shopping, you’ve probably evaluated the closet space and checked out the bathrooms. More importantly, though, have you audited the association? No? Well, here’s how to get started:
- Get the records. In the Offer to Purchase (or at least the Purchase and Sale Agreement), require the seller to provide the condo association’s documents, rules, and financial statements by a certain date and at their expense. In this step, you’re not only interested in the documents’ contents; you’re also interested in how easily you obtain the records. If a condo association delivers incomplete records or delivers them late, it may be a sign of poor management.
- Evaluate the financial statements. Take a good, hard look at the bank statements and budget. Verify that it’s reasonable and complete. Then, take a look at the association’s savings reserve. As a general rule, an association should have savings equal to at least 10-15% of its annual budget.
- Evaluate the documents and bylaws. In this step, you are looking for two issues. First, make sure that there are no restrictions that would make your life difficult there – bans on dogs, bans on smoking, etc. Second, consider what rules are not enforced. If you see a rule that is openly violated by other unit owners, it may be a sign of weak management.
- Verify any special assessments. When a condo association undertakes a large project, it usually pays for it through special assessments. In those circumstances, each unit owner is charged their share of the project in a mandatory bill. This can often be a very large expense. Get signed verifications from the association and the seller that no special assessments are currently being considered. If there are special assessments to contend with, factor that into the purchase price.
- Verify any litigation. Like special assessments, you should get verification from the seller and the association that they’re not engaged in or facing any litigation. Otherwise, you’ll be indirectly dragged into the fight. Also, ask your attorney to review court dockets and deed records to ensure that no significant legal battles are overlooked.
A cautious real estate won’t discuss with you crime rates in a particular community. That’s because they don’t want to violate any antidiscrimination laws or professional regulations. It’s also because nobody truly knows the likelihood for crime in any given area.
Every intelligent person knows that crime could happen anywhere. Despite this truth, crime rates remain an important consideration to a homebuyer. Without encouraging unproductive overreaction or reckless apathy, I encourage homebuyers to take the following steps.
1. Research neighborhood crime statistics. The City of Boston publishes a very detailed crime map that illustrates reported crimes. Other communities may offer this same information.
This map will likely prove my first point – crime does and can happen anywhere. You may notice, however, specific hot spots within a specific neighborhood. Use this information carefully. Don’t write off certain neighborhoods or select certain areas solely based on this info. Instead, use this data as the start of further inquiry.
2. Get a sense of the area before buying. If you are considering relocation to a particular neighborhood, pay it a long visit. Drive the commute, walk the streets, and watch your surroundings.
3. Use the crime data and your observations to identify the specific risks within an area. Instead of only noting the volume of crime, understand the type of crime common in an area. That information should guide how you protect your home, your car, and your personal safety.
Where crime is concerned, there is no perfected method to predict the future or to rate neighborhoods. Enlist your common sense and make use of the wealth of information available. Most importantly, wherever you settle, take reasonable precautions with your property and your safety.
Just a few blocks away, the summer weekend has gotten off to a terrible start. The occupants of 191 K Street, a triple-decker, have suffered a serious multi-alarm roof fire. The exact cause and extent of damages is still unclear, but I want to remind (or tell) everybody about some key local Boston fire laws and safety measures. Be safe!
We don’t know what happened here, yet, but roof fires are often caused by illegal grills. Grills are highly regulated on or near buildings in Boston – and other communities across Massachusetts. That’s because, simply, they’re dangerous – much more difficult to control than your kitchen range. So, here are some laws to keep in mind. More importantly, here’s to a safe summer!
Charcoal grills are very dangerous on or near buildings. Why? They’re unpredictable. You cannot quickly adjust for wind, flame height, or smoke. Untrained people with lighter fluid is also a terrible idea.
That’s why Boston’s Fire Department has banned them anywhere within or on a residential structure. They’re not allowed on roof decks, porches, decks, fire escapes, etc. They’re also not a great idea up against a building.
Gas & Propane Grills
Propane grills are a little bit safer than charcoal grills. Still, they’re not as controllable as your kitchen stove.
Under Massachusetts state regulation, grills with a portable fuel tank, including propane, are not allowed anywhere above the first floor. Ever.
Even on the ground level, they cannot be placed within 3 feet of windows/doors or within 5 feet of AC air conditioning and other air intakes. Obviously, it would be illegal (and ironic) to use them on part of a fire escape.
For More Safety Tips: see the Boston Fire Department’s grill safety guide
I realize that every Massachusetts lawyer with a blog has written about the Homestead Act. Why? It’s a recently updated, win-win law that would likely benefit every homeowner in the state. Plus, the rule is simple and easy to outline in a blog post.
From a lawyer’s point of view, it also doesn’t hurt that Declarations of Homestead are nice, short assignments that allow us to meet with a wide range of new clients.
That being said, what is a homestead?
It’s a state law protection that prevents homeowners from losing their home to certain liabilities – generally lawsuits and unsecured debt. It protects only your primary residence.
While it defends your home against most court judgments, lawsuits, and unsecured debts, it doesn’t protect you against:
- Foreclosure based on your mortgage, home equity loan, or condo fees
- Federal, state, and local taxes
- Government liens for nursing home services
- Alimony & child support
- Prior liens
- Judgments for fraud and related offenses
What do I need to do?
If you do nothing, your home will automatically be protected up to $125,000. In Massachusetts, of course, that may not be enough. If you file a “Declaration of Homestead” with your county’s registry of deeds, that protection grows to $500,000. It’s a fairly simple form and costs only $35 to file.
How does the updated law help me?
The updated law created the automatic homestead of $125,000 and raised the declared homestead protection to $500,000. It also added increased protections for:
- The elderly and disabled
- Homes with 3+ owners
- Live-in family members after the owner’s death
What if I want more information?
Sick of cigarette smoke in your condo building? Well, you’re not alone. A growing number of Massachusetts condominiums are considering adopting smoking bans.
How can a condo association ban smoking? That’s a good and not-yet-resolved question. As I described in a past blog post, condo associations have very limited ability to control behavior within units. Generally, rules that impact what you do in your condo must be put in place before you buy.
For that reason, some condo complexes (such as Boston’s Harbor Towers) have banned smoking while grandfathering current owners and tenants. This dodges the legal limitations of condo associations. As you can imagine, though, it’ll be years before Harbor Towers will be smoke-free.
Other buildings (such as Millennium North, part of Boston’s Ritz-Carlton) have taken the much more controversial route – banning without grandfathering. Not surprisingly, this immediate ban landed the association in court. Condo practitioners, like me, are anxiously awaiting the result. This case will likely determine the validity and strength of condo smoking bans in Massachusetts.
Although the association has won in the early stages of litigation, I’m not convinced that they’re on solid legal footing. The smoking ban surely reaches behavior inside private condo units, where condo trustees’ power is very limited. Remember – condo associations exist to govern the common areas of the condominium.
So, the legal issue (I think) comes down to this — Is smoking a private activity done inside your unit, or is it something that pollutes, and therefore takes place in, a condominium’s common areas?
So, you’re thinking about buying a place together? Congratulations! As a same-sex couple, though, you should be aware of the extra complications in jointly buying real estate. It should come as no surprise that discriminatory federal rules yield unfair consequences for gay and lesbian couples.
This post introduces more problems than solutions. Sorry about that. I can blame two reasons. First, each couple’s circumstance varies dramatically based on where they live, who they are, and how much money they have – making general advice impossible. Second, there just aren’t solutions for some problems.
So, when buying property together, you should be aware that:
1. Tax rules are unfair. Even if you’re married in state, the federal government – and the IRS – don’t recognize your marriage. All of the tax benefits of marriage and joint filing simply don’t apply. In the eyes of the feds, you’re closer to casual business partners than a unified household. This has extremely negative tax consequences, especially relative to the estate tax. The best general advice I can offer to same-sex couples is to record the relative financial contributions of each partner/spouse to your home. If one party dies, costly estate tax could be triggered if the survivor can’t demonstrate their significant contribution to the property’s purchase and maintenance. Of course, opposite-sex married couples need not do any of this.
2. Divorce rules are unclear. There’s a fairly large legal purgatory for gay marriages and divorces. If you and/or your spouse moves to one of the many states without same-sex marriage, you may not be able to get a divorce. Without access to divorce, you cannot get a court to supervise an equitable distribution of the property. Instead of considering what’s fair (or even what a prenuptual agreement says), you’ll only be able to split the property the same way joint investors would.
3. Immigration rules are completely unfair. If your partner isn’t a US citizen or permanent resident, you probably (or should) know the immigration consequences of any action should be considered. While heterosexual marriages can facilitate immigration applications, a same-sex marriage can be used against you. It can be coldly viewed as evidence that you plan to “overstay” your visa, for example. Similarly, you should know what message a joint purchase in property will send to immigration officials. If immigration is an issue, get legal help before making a decision.
4. You need a will. If you intend for your spouse to inherit your share of the property, you should say so in your will. If you remain always in Massachusetts, the basic protections for married couples will help you. If, however, you die as an out-of-state resident, it could be very different. So, if you intend for your partner/spouse to inherit your share of real estate, you should say so in your will.
5. The rules are constantly changing. Things are evolving, usually for the better. Because the rules (and tax rates) are always being changed, you should continually be reviewing your property and estate plans.
For more resources on LGBT legal rights, click here.
As spring returns, so do the birds, flowers, and real estate agents. Open house season is coming, if it isn’t here already. So, before you get too excited and before you make that first offer on a house or condo, here are some tips:
1. Engage an attorney before you make an offer. On this blog, I’ve avoided offering too much self-serving advice. But here, I’ll make an important exception – get legal counsel before making any offers.
When you make an offer to purchase real estate, you’re entering into a binding contract. Although the more elaborate purchase and sale agreement will come later, you still want to lock in everything that’s important to you as soon as possible. Even at this stage, you should be protecting against unanticipated changes in circumstance. An attorney can help with this. Plus, many attorneys (including myself) don’t charge anything additional for early-stage work. I’d much rather help from the beginning than fix things halfway through the process.
2. Snoop around online. Use your Googling skills. Start with online public records. There, you’ll be able to discover the property’s sales & mortgage history, its listing history, and even some the owners’ personal history. If it’s a condo, you’ll discover the community rules and the association’s history.
If you’re really up to the challenge, use this information to decipher why the property’s on the market. Does the seller seem motivated or patient? Is this condo her nest egg or a miscellaneous investment? Information is power in negotiation.
3. Include everything that’s important to you in the offer. The standard offer form is generic. Make sure your specific needs and interests are addressed in the offer. For example:
- In all condos, ask the seller to provide all condo documents and financial records. Otherwise, you may get stuck paying to obtain this information.
- If parking’s a shared arrangement, identify as precisely as possible the parking to be included. If parking spaces are numbered, find out the number and specify it on the offer form.
- If you’re unsure of the condominium pet rules, make your right to a dog a condition of the offer.
- If there’s a piece of furniture that makes the place for you, don’t assume it’s included. Ask for it now.
For more resources, click here.