D.C. from New Jersey writes:
Dear Mister Condo,
We are purchasing a unit in a two-unit condo building in New Jersey. Both units are in foreclosure so there is no condo by-laws or homeowners policy or paperwork regarding the condo. Where do we start? We are being told that we need to provide flood insurance and building insurance for the whole structure because the unit downstairs is bank owned. Not sure where to go with this because we are not being handed anything and basically appear to be forced to develop a condo policy on our own. Any help or advice is appreciated.
Mister Condo replies:
D.C., you should begin at your Town Hall or other place of public land records. You should find a copy of the original declaration for the condominium there as well as any other governance documents that were filed when the property was declared a condominium. It isn’t enough to just claim a building is a condominium; there are some very legal papers that were filed to make it so. During a normal sale or transaction, these papers are conveyed to the new unit owner, as they are part and parcel of what the new unit owner is purchasing. Even in foreclosure, someone has a title to the property and these documents should have accompanied the title. If they didn’t, you may need to do a little digging to find them, but trust me, they do exist. Once you locate them, you can simply follow the procedures for governance as the document describes. The association, even in a small one like yours, is the body responsible for providing the necessary insurances for the condominium. This includes the Master Policy and, in your case, it would appear flood insurance as well. The cost for these expenses is included in the annual budget and paid for from common fees, along with whatever other amount is deemed necessary for the association to conduct business.
Governing a two-unit condo is the same as governing a larger condo in theory. However, as a matter of practicality, it is most common for a small condo to be self-governed. However, if you find that this is too difficult a challenge for your first year, you might consider paying a professional property manager a consulting fee or management fee to help get you started. This might prove very expensive but it would get you through this difficult transition period. If you simply “develop a condo policy on your own” you may find yourself in court defending your actions, especially if governance documents turn up and you handled the procedures incorrectly. Good luck!