There were two articles in the Maui News over the last few days that discussed the challenges condo associations are having with delinquent association dues. The Sunday article detailed how associations were subordinate to primary mortgage holders. This leaves associations in a difficult position for recovering unpaid dues on properties going into foreclosure. While associations may recover some back association dues from the buyers of foreclosed and bank owned properties, the sum is capped at $3600 by Hawaii state law. That may be well below the amount owed. This in turn poses budget challenges. The article in today’s paper delves further into how past dues are causing issues with the financial viability of a few island condo associations. Associations are taking measures to cut expenses, but still having a tough time managing their budgets.
With condo sales constituting a significant part of the Maui Real Estate market, the articles are something of an eye opener. To be clear, not all condos are having problems. One of the condos that is a focal point in the articles is said to have strong finances overall. It is also notable that the articles preserve the anonymity of struggling associations. That raises the question of how the average condo buyer knows if they are purchasing at a complex with a troubled association? If you are financing your transaction, your lender may have some insights. Condos that have financially troubled associations may be flagged by banks. Banks are looking at the health of associations as part of determining whether they will finance a transaction. You may want to ask your lender if they are aware of any financing challenges in the complex. If you put a condo under contract, you also have a contingency period that gives you the opportunity to read and review the condominium documents for the property. Documents of particular importance include recent association meeting minutes, proposed budgets, financial statements and reserve studies when available. If you have questions on the content of the condo documents, contact the association. If the documents are not to your satisfaction, you may cancel the contract during this contingency period without penalty.
Condos remain a viable form of ownership for many buyers. The challenges of today’s market just demand greater due diligence in your purchase. Contact us today if you have additional questions on purchasing Maui Condos for Sale.