The Washington DC Condo Guide Part IV
What you need to know before you buy: Condo Documents | Part IV Of A Five Part Series
𧰠This is Part IV of my five-part series on Washington DC condos. It covers âCondo Docsâ (aka the condominium resale certificate package). What are âcondo docsâ? Learn what should be included, what to review and the importance of buyer due diligence. DCâs right-of-rescission explained. Plus, legislative updates and links for the Condo Act in the District of Columbia.
This article was originally published as part of my đ ď¸Tools series at realestateinthedistrict.com. Itâs been updated and expanded here on my Substack, DC Real Estate Channel.
You can find links for the full series archive at the bottom of each post.
Part IV: Condominium Resale Certificate Packages
What Are âCondo Docsâ?
This package provides buyers of DC condos with a overview of the property's finances, condo association rules and regulations, and other materials pursuant to "DC Code Section 42-1904.11. Resale by unit owner."
The package is named âCondominium Resale Certificateâ but it is commonly known as the âcondo docs.â These used to be hard copies, hand-delivered in huge binders. Thank goodness those days are over! Now theyâre delivered electronically.
Whatâs Included? Tell Me In 30 Seconds.
Hereâs what the District of Columbia Condominium Act (as amended) says should be included, and when:
The unit owner shall obtain from the unit ownersâ association and furnish to the purchaser on or prior to the 10th business day following the date of ratification of the contract of sale, a copy of the condominium instruments and a certificate setting forth the following:
Appropriate statements pursuant to Section 42-1903.13(h) and, if applicable, Section 42-1903.15, which need not to be in recordable form;
A statement of any capital expenditures anticipated by the unit ownersâ association within the current or succeeding 2 fiscal years;
A statement of the status and amount of any reserves for capital expenditures, contingencies, and improvements, and any portion of such reserves earmarked for any specified project by the executive board;
A copy of the statement of financial condition for the unit ownersâ association for the then most recent fiscal year for which such statement is available and the current operating budget, if any;
A statement of the status of any pending suits or any judgments to which the unit ownersâ association is a party;
A statement setting forth what insurance coverage is provided for all unit owners by the unit ownersâ association and a statement whether such coverage includes public liability, loss or damage, or fire and extended coverage insurance with respect to the unit and its contents;
A statement that any improvements or alterations made to the unit, or the limited common elements assigned thereto, by the prior unit owner are not in violation of the condominium instruments;
A statement of the remaining term of any leasehold estate affecting the condominium or the condominium unit and the provisions governing any extension or renewal thereof; and
The date of issuance of the certificate.
Small and self-managed associations may not be required to offer the same resale packages as larger, professionally managed associations. Check the provisions in the DC Condo Act for clarity, and consult a professional to assist you with review.
If the required instruments and certificate are not furnished to the purchaser on or prior to the 10th business day following the ratification date of the contract of sale, the purchaser shall have the right to cancel the contract by giving notice in writing to the seller prior to receipt of the condominium instruments and certificate, but not after conveyance under the contract.
What Is âRight Of Rescissionâ?
By definition, ârescissionâ is the revocation, cancellation, or repeal of a law, order, or agreement.
The DC Condo Act (reference your purchase agreement) essentially gives buyers the right to review public offering statements, association documents and/or resale certifications for a specified number of days from date of receipt and withdraw from an applicable Washington DC real estate transaction should they not find details acceptable.
I wrote an entire page about rescission periods. Take a look:
Buyer Due Diligence Checklist
â Review:
Current budget and financial condition, reserve funds
Current Bylaws, architectural guidelines, CC&Rs (Covenants, Conditions and Restrictions), rules and regulations
Monthly association fee and capital contribution
Master Insurance Policy coverage
Occupation limitations (number of people who may occupy a unit)
Statement of unpaid fee assessments, special assessments, and/or planned assessments
Records of current/pending legal action or judgements by or against the developer, association, board or unit owner
Certification of filing for the associationâs annual report to state board (some associations exempt)
Records of approved alterations to the unit, if any
Violation notices to current unit owner(s)
Delinquent fees for unit/owner
â Pay Particular Attention To:
The financial condition of the association or corporation managing the property
The condominium's investor ratio (owner-occupents vs renters) and cap, if any on rentals (subject to percentage caps that can render a building unwarrantable)
Rental restrictions, if any
Pet restrictions, if any
Smoking restrictions, if any
Percentage of association's commercial property square footage, if any (retail components) subject to percentage caps that can render a building unwarrantable
Percentage of delinquent dues by owners and duration of delinquencies (subject to percentage caps that can render a building unwarrantable)
Board member term limits
Levied or planned special assessments
Liens or judgements against the association
Repairs in progress, or a schedule of planned repairs, for association
Improvements or alterations made to the unit. Are they in compliance with board/association regulations and standards? Did the unit owner obtain the proper permitting and inspections, if required?
Frequency and increments of dues increases. Is there an annual cap on increases?
Reserves for major repairs or improvements
Age and condition of major components such as roofs, HVAC systems, plumbing and electrical, elevators, common area elements
Minutes for the past 3-6 board meetings. Review for discussions of expenditures, repairs, legal proceedings and other issues that might shed light on the associationâs future spending and assessment plans, or issues the association or unit owners are experiencing.
â Homestead Deduction:
Owners of condominium units may be eligible to receive the benefits of the District of Columbia Homestead Tax Deduction.
This benefit reduces your real propertyâs assessed value by $84,000 (savings of $714.00) prior to computing the yearly tax liability.
The Homestead benefit is limited to residential property. To qualify:
An application must be on file with the Office of Tax and Revenue;
The property must be occupied by the owner/applicant and contain no more than five dwelling units (including the unit occupied by the owner); and
The property must be the principal residence (domicile) of the owner/applicant.
If a properly completed and approved application is filed from October 1 to March 31, the property will receive the Homestead benefit for the entire tax year (and for all tax years in the future). If a properly completed and approved application is filed from April 1 to September 30, the property will receive one-half of the benefit reflected on the second-half tax bill (and full deductions for all tax years in the future).
đ Links:
Getting into the weedsâŚ
DC Condo Act And Legislative Updates
Familiarize yourself with the DC Condo Act. This is the governing legislation for condominiums in the District.
The District of Columbia Condominium Act of 1974 was amended in 2022, effective in 2023;
The Act was amended in 2016. The Condominium Owner Bill of Rights and Responsibilities Amendment Act of 2016, became effective April 7, 2017;
The Act was amended in 2014.
DC Law 24-262. Condominium Warranty Claims Clarification Amendment Act of 2022
D.C. Act 24-262 amends the Condominium Act of 1976 to clarify standards and procedures governing the resolution of a claim filed upon a condominium developer's warranty against structural defects, to provide that a judicial, non-judicial, regulatory, or administrative proceeding for breach of a warrant that arises under this act shall be commenced within 5 years after the date the applicable warranty period began, to provide that the filing ofa claim with the Mayor shall not preclude the claimant from also seeking to judicially enforce its claim, and to clarify the penalties for violating a provision of this act.
Primary changes:
The definition for the term âstructural defectâ was expanded to include DC building code for violations resulting in 'demonstrable harm' to the health or safety of residents, or if units are conveyed before a Certificate of Occupancy is issued by the DoB, or prior to substantial completion of the condominium;
The 'resulting damage' caused by a structural defect may now require tbe developer to repair as part of its warranty obligations. Developers were previously responsible solely for correcting the defect, not necessarily liable for any resulting damages;
Requires developers to obtain certified documentation for the project's estimated âhard costsâ and supplement their 10% bond with additional funds if actual costs exceed estimated costs by a certain amount. The Mayor must establish a searchable online database for condominium bonds.
Clarifies the deadline for submitting a claim on the developer's bond. The warranty period is two years from the date of sale, but the time to file claims will be 5 years from the date of sale. Notice and response provisions have been established for associations and developers to follow prior to making claims with the city.
The Act prohibits condominium instruments from restricting an association from asserting claims for defects against a developer. Previously, developers could (and would) insert procedural roadblocks in the condominium instruments designed to discourage associations from asserting claims. These included requiring an association to engage in mandatory alternative dispute resolution (mediation or arbitration);
Added with this Act are provisions for appeals of any warranty bond decision to DCâs Office of Administrative Hearings;
The Act requires a Claims Fund to be established for financial assistance to associations making claims on the warranty bond, for expenses such as inspections, cost estimates, and attorneysâ fees. Eligibility is based on financial need.
These legislative changes to the DC Condominium Act affect:
Condominium boards
Unit owners
Project developers
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GSE Compliance Changes 2023
Freddie Mac & Fannie Mae Updated Condo | Co-Op Guidelines
In cooperation with the FHFA, Government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae updated their guidance for condominiums and cooperatives in 2023, two years after issuance of a 2021 letter by Fannie Mae that created temporary requirements for condos and co-op projects. This action was prompted by the partial collapse of Champlain Towers South condominium in Florida that killed 98 people and injured 14 others.
Primary Changes
Project standards policies for properties in need of critical repairs and special assessments: The project review requirements update is intended to assist lenders in identifying projects that may have issues resulting in unsafe conditions.
đ Sources & Resources
Who Is Affected?
Any Association legally recognized as a âcondominiumâ or a âcooperativeâ with more than five units. Regarding the term âcondominiumâ; Some associations govern properties marketed as townhomes, but which are legally defined as condominiums. The designation of a property can be confirmed in the Declarations and Articles of Incorporation for the project.
Ultimately, condo buyers are affectedâand better protected.
The Fannie Mae Update
Project standards policies update to address projects in need of critical repairs, and projects that have material deficiencies (such as significant deferred maintenance) or special assessments.
These requirements apply to all loans secured by units in condo projects (condo loans) and all cooperative share loans secured by share ownership in a co-op project (co-op share loans) with five or more attached units, regardless of the project review type.
The requirements also apply to loans eligible for delivery under the waiver of project review policy. These project review requirements:
⪠Define critical repairs, material deficiencies, and significant deferred maintenance, including defining routine repairs that are not considered critical;
⪠Prohibit sale of condo loans and co-op share loans in projects in need of critical repairs;
⪠Prohibit sale of condo loans and co-op share loans in projects with current evacuation orders due to unsafe conditions;
⪠Require a review of all structural or mechanical inspection reports that have been completed within 3 years of the project review date;
⪠Provide new requirements for condo or co-op projects with special assessments;
⪠Prohibit sale of condo loans and co-op share loans in projects with unfunded repairs totaling more than $10,000 per unit, and;
⪠Prohibit sale of condo loans and co-op share loans in projects that have an "Unavailable" status in Condo Project Manager⢠(CPMâ˘).
This guidance can be found in Fannie Mae's Selling Guide Update which was created in cooperation with the Federal Housing Finance Agency (FHFA).
The Freddie Mac Update
Freddie Macâs revised guidance was presented as an update to its Condo Project Advisor. All requirements became effective on September 18 2023.
In its messaging to lenders, Freddie Mac wrote:
"On July 29, 2023, weâll update the âIncomplete Assessmentâ feedback message in Condo Project AdvisorÂŽÂ to indicate when a condo project may need critical repairs. Hereâs what you [lenders] need to know:
Currently, if a Project Assessment Request (PAR) submitted to Condo Project Advisor receives an âIncomplete Assessmentâ feedback message (CPAX1013), thatâs an indication that the tool canât assess the project. This includes the requirement in Section 5701.3(n) that a project is ineligible for sale to Freddie Mac if it needs critical repairs.
On July 29, 2023, weâll make things easier for you [lenders] by updating one of the âIncomplete Assessmentâ messages to alert you that the project may need critical repairs. You can determine whether or not a project does indeed require repairs. This can assist you in determining compliance with Guide Sections 5701.2(a) and 5701.2(b)."
đ Key Link | Freddie Mac
Critical Repairs & Evacuation Orders: Condominium and Cooperative Project Requirements Tutorial
Summary:
Reserve Study & Funding
A reserve study will satisfy most of the requirements as long as the association is following the recommendations laid out in that study. Fannie and Freddie both require that 10% of operating budget goes to Reserves. (note: Fannie waives this requirement if a reserve study is in place and up to date).
New Reserve Requirements
Fannie Mae and Freddie Macâs newest guideline change has an increased focus on requiring condo and co-op boards to maintain a 10% or greater reserve line item for future maintenance. Although this requirement has been in place for years, the 10% reserve line-item has often been left out of condo and co-op budgets so unit owners could enjoy lower monthly dues. Some condo and co-op boards have flat-out refused to add the reserve line item to their operating budget.
Freddie Mac still accepts a reserve study to outline appropriate and accurate reserve funding in lieu of the 10% reserve line item.
New Condominium Questionnaire
A new 3-page addendum to the existing condominium questionnaire has been issued. The following are two of the key additions:
When was the last building inspection by a licensed architect, licensed engineer, or any other property inspector, and did the last inspection have any findings related to the safety, soundness, structural integrity or habitability of the buildings?
Is the association aware of any deficiencies related to the safety, soundness, structural integrity, or habitability of the buildings?
Lenders now request that associations make affirmative representations about the structural soundness of the buildings. Previously, associations were simply providing information about the property, and the lender would make its own determinations. Boards may now be held accountable if their affirmative representation is inaccurate.
Compliance
Properties must meet key criteria, including a reserve account with capital sufficient to cover future repairs and replacement of common area mechanical and structural components.
Compliant properties must also have a current reserve study
Compliant properties must provide a completed baseline questionnaire which address new GSE questions by attaching an updated reserve study, engineers report, or their equivalent for review.
Condo and co-op properties must now reserve adequate capital for component repairs. If they do not comply with the new guidelines, financing will not be available.
Buildings must obtain professional evaluations of components, set aside appropriate funds for future capital repairs and complete repairs to components whose maintenance has been deferred or ignored.
Part V Preview:
Q&A is the final part of this series. Iâll answer common questions about District of Columbia condominiums and the purchasing process. If you have a question that isnât addressed, drop a comment and Iâll reply!
đŹ Want personal guidance or have questions about multifamily home types in the District? Reply here or schedule a consult. Iâll help you decode it all!
đ§ Series Archive
The Washington DC Condominium Guide
An in-depth series for Washington DC buyers navigating condo purchases.
đ Parts 1 - 5
đ Part 1: Condo Basics
What is a condominium? How does condo ownership work? Why buy a DC condo?
đ Part 2: What Does The Monthly Fee Cover?
Does the monthly association fee seem high? What does it cover, exactly? Whatâs a Capital Contribution? Breaking down the monthly cost of condominium ownership.
đ Part 3: Financing a DC Condo
Learn about condo financing options, what conditions make financing difficult or impossible and Zuzuâs little contract clause that protects buyersâ earnest money deposits if a building is unwarrantable.
đ Part 4: Condo Resale Certificate Packages
What are âcondo docsâ? Learn what should be included, what to review and the importance of buyer due diligence. DCâs right-of-rescission explained, the DC Condo Act outlined + legislative updates and links.
đ Part 5: Condo Q&A
Answers to common questions about purchasing a Washington DC condominium.
𧰠This post is part of a multi-part series originally published as a long-form article in the Tools section of my website, realestateinthedistrict.com.
Each post is being updated for this Substack channel, and optimized for clarity and readability.
The original long-form Tools pages will remain on my website for reference purposes until July 23, 2025.
Disclaimer:
We are not attorneys, legal experts or CPAs. The information presented on this channel is derived from reliable sources, but should not be considered legal, financial or investment advice. Susan Isaacs and Compass, their principals and/or representatives, do not guarantee or warrant its accuracy, completeness, or applicability to any specific transaction. Homebuyers should read applicable D.C. law and code themselves as part of their due diligence, and seek help from licensed, qualified professionals for interpretation and application to their specific transaction.