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Our seller worked with their Realtor to order the usual contractually required condominium documents to provide to the buyer. The seller's Realtor saw a note in those condominium documents that there were outstanding condominium fees of $25,000!
After the initial shock had passed, it turned out the $25,000 was not for condominium fees but an assessment for a deductible related to the common property insurance policy. The seller had a flood in his unit that damaged other units. Condominium corporations are now allowed to have deductibles up to $50,000 where a unit owner causes damage to other units. They can go after the unit owner for the cost of the deductible.
The good news is that the seller had that all-important Condo Owners insurance policy that covered the deductibles that the Condominium Corporation could charge back to an owner.
Two Bits of Bad News
First, the seller thought that the Condominium Corporation or their insurance company would directly contact the owner's insurance company and deal with the issue. Not so. It is the seller's job to report this to his own insurance company. So, we were seven days from closing with a $25,000 charge against the unit, and the seller's insurance company didn't know about the deductible claim.
The second bit of bad news was that insurance matters move about as quickly as glaciers. It is likely to take at least a month (or more) to sort this out, and closing will be delayed for an undetermined amount of time, much to the upset of everyone's plans.
LESSONS LEARNED
- As the seller's Realtor, look at the condominium documents, especially any reference to condominium fees, special assessments or deductible chargebacks. Ask your seller if they are up to date with their condominium obligations. Ask about special assessments or insurance claims.
- For buyer's Realtors, that condo owner's insurance policy is so important! We remind buyers to get this policy, but it's useful if you remind them as well.
Protect yourself.
Cheers,
Barry
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