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As an owner, you are entitled to inspect the financial records of your association. You may need to present yourself at the association management's office during business hours, but this is your right as a member of the association.

If you are a prospective buyer, you are entitled to review (up to three years' in some states) financials and/or audits -- and board meeting minutes as part of your due diligence prior to close. Your access is through the current owner.

Condominium associations develop annual budgets to cover the anticipated costs of expenses for the next year. Then, depending on the ownership distribution, owners pay assessments to cover these expenses.

Here's what to look for to ascertain financial health for an association:

  • Confirm the association's banking processes and policies, including
    • who reviews invoices?
    • who signs checks?
    • who pays bills?
    • who else has access to bank accounts?
  • Minimal past due assessments, and evidence that no more than 15% of owners are past due at any one time, with vigorous collection efforts performed once an account becomes 90 days past due.
  • Year-end accounts showing that no line-item category of expense is grossly over budget.
  • Year-end accounts showing that in general, expenses are budgeted.
  • Any activity for special assessments.
    • You can find rationale for special assessments in board meeting minutes.
  • Reserves contributions that are in line with the Reserve Study, to show that the board has defined appropriate assets and their useful lives, and is contributing to reserves in order to minimize special assessments for major projects.
  • Only 'legal' withdrawals from reserve accounts.
  • Audits or evidence of audits that confirm that the financial record keeping of this association follows sound financial accounting practices for associations.
  • Any loan agreements signed by the association, including their current status.
  • Status of master insurance policy deductible -- may be different for different kinds of losses -- whether it's already available or will require a special assessment to cover.

You can read more about association finances using the tutorial, below.

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