Did you know that condominium buildings, as we know them today, really began flourishing in Chicago in the 1960s? As the Encyclopedia of Chicago explains, the Illinois Condominium Property Act authorized the construction of condos starting in 1963.
This housing style – in which owners have exclusive ownership of an individual unit in a building, as well as common ownership of shared areas and amenities – quickly gained a lot of popularity for buyers and developers alike.
For buyers? Condos presented homeowners with the chance to purchase a piece of Chicago, without having to buy a full single-family home. For developers, meanwhile, investing in condos meant the opportunity to build multiple units on a smaller parcel of land – often a lucrative proposition for builders, then and now.
Today, condominiums are a common sight around Chicagoland – so much so, that it’s easy to believe they’ve been part of the city’s housing landscape forever. They’re available throughout the area – from the gleaming high-rises of the Loop and River North, to the mid-rise buildings that fan out in Hyde Park, Uptown, and Lincoln Square.
And condos continue to appeal to many different types of buyers, just as they did 50 years ago. For many, a condo is a great “first step” in terms of property ownership, acting as a starter home for young families, or a “downsizing” option for older adults. In other cases, a condo is an attractive option for those looking to own a spacious property with top-of-the-line amenities, while still getting to live in the heart of the city.
Whatever the case may be, condos are big business in Chicago. For buyers, it’s important to know some of the risks and rewards of condo ownership, before you make the choice to invest in this unique style of housing. So, what should individuals and families consider before buying a Chicago condo? Here are three important steps to take before committing to a condo, which could make all the difference for your finances and lifestyle down the line:
1.) Review Essential Information About the Condo and Condo Association
In Chicago, there are three numbers to know as you look into condos: 22.1. In our area, the 22.1 disclosure is a common piece of any condo transaction. This disclosure includes the condominium documents and information that a condo association or management company must present to a prospective purchaser and their team upon request. In order to comply with the law, this package will likely contain many different types of relevant paperwork and information, including:
- Condominium association documents, including declarations, bylaws, and other rules and regulations
- Contact information for the condo owner’s association
- Liens, unpaid assessments, and other charges due within the building
- Projected budget and capital expenditures, as well as information on the building’s finances
- Any pending lawsuits or other legal cases involving the condo association/building
- Budget information, including reserved funds or budget earmarks or specific projects
- Insurance information
- Standard disclosures pertaining to changes to the specified unit
As a prospective buyer, it may prove important to go through this paperwork and information, as it could reveal some important context about your future home. For instance, getting a handle on the building’s financial reserves could give you a sense about your future need to pay special assessments.
In addition to this information, you may also want to look into other important documents and information, including finding out if the building/condo association is involved in any litigation, understanding if there are any restrictions on making renovations or updates to your unit, and breaking down how much of the complex is owner-occupied versus renter-occupied.
2.) Consider the Costs of Fees and Assessments
As writer Tim Marklew puts it for The Culture Trip: “Hidden costs are often a hazard to avoid when buying a new property, but you can learn the potential for additional costs before completing the purchase.”
When it comes to condos, it’s important to have a firm understanding on what you’ll pay above and beyond your mortgage, including standard HOA fees, and special assessments.
In most cases, paying assessments is part and parcel of owning a condo in Chicago. Standard assessments are determined by your condo associations’ board of directors after a thorough evaluation of the community’s budget and expenses, and may go to everything from covering the building’s insurance, to paying for garbage collection, to handling routine maintenance and upkeep of pools, gardens, and common areas. These assessments can and, often, will rise over time.
It’s also important to keep in mind that, as a condo owner, you may be levied with special assessments over time. These are fees charged to help with a specialized or emergency project for the community, like paying for repairs after a storm, or performing major functional updates on a building’s foundation, plumbing system, or roof.
As contributor Alex Mayster puts it for U.S. News & World Report:
“The monthly costs can be daunting on their own, but special assessments can do even more damage to your bank account. If things like an elevator or roof need work, condo owners may be hit with special assessment costs reaching tens of thousands of dollars.”
As a prospective buyer, one resource who may be able to help is an experienced real estate attorney, who can assist with matters including negotiations, document review, litigation, and more, at every stage of your journey. Prior to purchasing, an attorney can help review relevant documents, in order to help you get a handle on the HOA’s finances, and determine if their current fees and assessments are fair and reasonable – as well as helping to gauge if those fees may rise in the future. An attorney may also be able to point to questionable language or information in the bylaws or other documents, and assist with negotiations or disputes down the line.
3.) Plan Ahead If You Want to Use Your Unit as an Investment Property
As we noted earlier, condos often draw buyers who see their unit as a launch pad for other real estate opportunities. Often, condo buyers may eventually decide to move on or move up – but still want to take advantage of their condo unit as an investment or business opportunity. This could mean leveraging their unit as a rental property, or listing it as a short-term/homeshare on sites like Airbnb or VRBO (among others).
In any case, it’s important for condo owners to plan ahead, and to consider all of their options – and any restrictions or obstacles they may face.
For instance? In some condo complexes, there may be a cap placed on how many units can be rented out (such as 20%), limiting your ability to use your unit as a rental. Different condominiums will also have different rules in place regarding short-term rentals. Some buildings may altogether prohibit short-term or transient rentals.
Considering Buying a Chicago Condo? Do You Have the Right Team In Place?
When it comes to condominiums, one important decision could make all the difference as you prepare to set up your long-term financial future: Building the right team.
Surrounding yourself with the right people now could mean saving yourself from headaches, hassles, and confusion down the line. Whether you’re just beginning your search for a new condo, or you’re a current owner with a pression question or concern, finding an experienced real estate attorney could help you reach the answers you’re looking for.
There’s a lot that goes into condominium law in Chicagoland – and when you’re facing a challenge, you want an attorney on your side with a wealth of experience, and a personal approach that ensures that your needs are met, with no excess confusion along the way.
At the Gunderson Law Firm, our attorneys and staff possess unparalleled expertise and insight, underscored by long-term connections throughout Chicago’s real estate, finance, and insurance industries.