Condo Fees, Reserves, and Master Deeds: What to Read Before You Buy

A low condo fee is more often a warning than a bargain. The building's expenses are what they are — roof, heating plant, elevator, insurance, snow removal — and an association charging less than those costs require is not saving you money. It is deferring the bill, and it will arrive as a special assessment, in a single sum, at a time you do not choose.

The fee is therefore the wrong number to lead with. What matters is whether the association is adequately funded for what the building will actually need, and that question is answerable — Massachusetts condominium buyers have a right to the documents that answer it, and the window for reviewing them is one of the most valuable parts of the transaction.

What documents should you actually read?

• The master deed — defines the units and the common areas, the legal boundary between what you own and what the association owns. It determines who is responsible for the windows, the deck, the parking space, and the storage unit. Read it before assuming a parking space conveys.
• The declaration of trust and bylaws — how the association is governed, how the board is elected, and what does or doesn't require a unit-owner vote.
• The rules and regulations — pets, rentals, short-term rentals, renovations, noise, moving. Restrictive rental provisions matter enormously to an investor and can matter later to an owner who needs to relocate without selling.
• The budget and most recent financial statements — compare income against expenses and look for the reserve contribution as a line item.
• The reserve study, if one exists — a professional assessment of the building's major components, their remaining life, and what should be set aside. An association without one is guessing.
• Two or three years of board meeting minutes — the most underrated item. Minutes are where you find the leaking roof discussed for four meetings, the dispute with a contractor, the assessment being contemplated. Sellers disclose what they must; minutes record what is actually happening.

Ask directly, in writing: is any special assessment currently contemplated or under discussion? Has the association had litigation in the past five years? What is the current reserve balance, and what does the reserve study say it should be? Vague answers to these questions are themselves an answer.

Why does the association's health affect your financing?

Because your lender underwrites the building as well as you. A condominium must be warrantable for most conventional financing, and buildings fail that review for reasons a buyer cannot influence: inadequate reserves, too high a share of investor-owned units, a single owner holding too many units, ongoing litigation against the association, or commercial space exceeding a threshold.

The consequence is severe and often discovered late — your loan is declined on a building, not on you. It also affects your eventual resale, because your buyer will face the same review. A non-warrantable building has a permanently smaller buyer pool, which shows up in price.

Ask your lender to review the building early. Our pre-approval guide explains why a clean pre-approval says nothing about the building.

What is a special assessment, and how bad can it be?

A one-time charge levied on unit owners for an expense the reserves cannot cover. Roofs, elevators, facade repair, heating systems, and structural work are the usual causes. The amount is allocated by each unit's percentage interest, which is set in the master deed — so a larger unit pays a larger share.

They can be very large, and in a small association they can be larger still, because there are fewer units across which to spread a fixed cost. A six-unit building facing a roof replacement is a materially different risk from a sixty-unit building facing the same roof.

Timing matters legally as well as financially: who owes an assessment voted before closing but payable after is a term to settle in the purchase agreement, not a question to discover afterward.

What are the genuine advantages?

Worth stating, because the above is a list of risks. You are not personally responsible for the roof, the exterior, the landscaping, or the snow. For a downsizing owner, someone who travels, or a first-time buyer, that is a real and valuable transfer of burden. Shared costs also make amenities affordable that would be impossible individually. And in dense parts of Greater Boston, a condominium is frequently the only way into a neighborhood at all.

The point is not that condominiums are worse. It is that you are buying a share of a small organization along with a place to live, and organizations can be well run or badly run.

What should a buyer do, in order?

1. Request the full document package as early as possible.
2. Read the minutes first. They are the fastest route to the real story.
3. Have your attorney review the master deed and bylaws.
4. Have your lender confirm warrantability before you are emotionally committed.
5. Compare the fee against what the building actually has to maintain, not against other buildings.

General information, not legal advice.