UNIQUE FINANCIAL CONSIDERATIONS IN PURCHASING A TOWN HOME

Thinking about buying a townhome? They are all the rage in Houston, springing up like mushrooms, especially inside Loop 610. What are the major issues you should be aware of?

You will be buying into a community as well as a residence. Just as a residence needs maintenance and upkeep, so do the “common areas” of the townhome community. Depending on how the community is structured this could include everything other than the inside of your house; that is the walls, roofs, roads, sidewalks, outside lighting, courtyards, landscaping, sprinkler system, pools, recreation facilities, garbage disposal, management fees, insurance, and taxes. When considering a purchase in a townhome community, first determine what is ‘yours’ and what is the community property. The more community property and responsibility it includes, the greater the shared financial responsibility of all the owners. Is the homeowner’s assessment sufficient to maintain the common property now and in the future?

DANGER, WILL ROBINSON, DANGER!
This relationship should be entered into only after considerable due diligence. A recipe for disaster is where the homeowner’s assessment is insufficient to maintain the community property, the owners cannot establish an adequate income stream, or cannot agree on a capital improvement assessment.

The Deed Restrictions provisions state how the annual maintenance and capital assessments are levied, and what are the powers of the Board of Trustees of the Homeowners Association (HMO).

Before you buy or sign, determine how well or how poorly the HMO functions. How financially stable is the community? How can you find that out? Think of it this way. You are getting ready to make an investment of several hundred thousand dollars. How important is it to you that it not go to hell in a handbasket?

Ask for the financial records of the HMO from the Board of Trustees and the management company. Especially important is the number of financial reserves. Communicate that the financial integrity of the community is an important consideration in your decision to purchase. Your realtor might be of assistance with this request. If they flat-out refuse, this will be a black mark. Once you get the records you may need to consult an accountant.

Can you rely on advice from your realtor on this issue? Is the primary interest of the realtor to close the sale? Finding out the financial stability of the HMO is ultimately your responsibility. Walk around the community and see if there are any obvious maintenance issues. Attend a homeowners meeting. If there are going to be grievances aired, that is one place where they will come out. Some HMOs have websites where owners post complaints. Check the county court records to see if lawsuits have been filed against the townhouse association. When all else fails, knock on doors, and talk to people. Like any investigation, you will have to use your imagination.

Consider contacting the Law Office of Elliott Klein, PLLC for an assessment of potential issues to be aware of when contemplating a purchase in a townhouse community.