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Buying in Common-Interest Communities Requires Extra Care

Common-interest communities are everywhere. They include such properties as high rise condominiums, retirement communities, planned unit developments around golf courses, and blocks of row houses in a small town.

"Common-interest" means that you may have title to your living space, but share the ownership of common elements with the other owners of your development. So, for example, when you own a condominium in an apartment building, you own your unit--the air space block within four walls, a ceiling, and a floor. You and the other owners share ownership of the halls, elevators, lobby, laundry room, etc.

From a legal standpoint, buying a condo, co-op, or home in another form of common-interest development raises some special issues. You're well advised to make sure you've protected your legal interests in any home purchase. But before you buy a home in any common-interest development, you need to take several additional steps to make sure you know what you're getting and protect yourself from surprises.

There are several different kinds of common-interest ownership, and each state's laws governing common-interest ownership differ. Your lawyer is your best guide in any particular transaction, but here are a few general suggestions.

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Condos and other homes in common-interest

 complexes raise special issues

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Check It Out

In addition to the normal steps in a home purchase--negotiating the sales contract, attorney approval of its terms, assuring that the title to the property is good, securing a mortgage, etc.--you and your lawyer will need to take additional steps when you purchase in a common-interest development.

Review of Prospectus and Disclosure Statement. If the development is new, state law probably requires that the developer give you these documents (which might have different names in your area). They formally describe what you are buying. Remember, the glossy brochures are generally considered ads--puffery that may have limited legal meaning.

In addition, some states have a central agency that licenses and regulates the development and sale of common-ownership units. Such an agency might be able to provide further useful information.

Financial Implications. When you own property in a common-interest community, you are obligated to pay money, usually to a homeowners' association, for such expenses as maintenance, upkeep, and insurance of property that is commonly owned. This usually means that you will owe a monthly assessment, in addition to your mortgage payment. It's usually apportioned as a percentage of ownership. If all apartments in a 10-unit building are the same size, then each owner would have a 10% ownership share and would pay 10% of the association's assessments.

Find out

how much the monthly assessment is for the property you are considering, and whether this amount is in keeping with assessments in similar developments;

if any increase is contemplated in the monthly assessment;

whether the rules of the homeowners' association or state law permit unlimited annual increases without a vote of the owners, or if there is a cap on how much assessments can go up;

if any "special" assessments are contemplated, to cover a new roof, furnace, or other large repair/renovation project, and, if so, what the estimated cost is;

whether the rules permit special assessments by the board of directors, or whether they must be voted on by the entire membership;

whether the financial condition of the association is good; ask to see the most recent budgets, and pay special attention to the size of any reserve funds--the larger they are, the less likely special assessments will be; also try to determine the percentage of owners in arrears, bankruptcies by owners, etc.--these too can impact on your bottom line;

whether there is enough insurance coverage for the entire complex (you'll get homeowner's insurance to cover your unit, but the association should have enough insurance to cover damage to building exteriors and common elements, plus liability for injuries on the premises).

Red Flags. You and your lawyer can investigate some other issues that might save you from making a commitment you'll regret.

Find out if the homeowners' association is involved in any major lawsuits, including those brought by builders, neighbors, or former owners. That could indicate trouble and expense down the line.

Determine how many units in the complex are occupied by renters. If it's a significant percentage, you may want to stay away. Renters may not maintain the property as well as you'd like, and absentee owners often don't want to pay for improvements/repairs to the common elements. In addition, banks may be less willing to make mortgage loans to complexes with many renters.

See if you can find out if there are major bones of contention within the complex. Look at the minutes of past meetings to see what kinds of problems have been coming up. Talk to some of the current owners. Remember, in a common-interest community you are to some degree financial partners of people you may not know. You don't want to buy into a donnybrook.

Do Your Homework. Common-interest communities are created by a specific set of documents, usually drawn up by the developer. And when the developer or converter bows out, the community's affairs are governed by an association of all unit owners through its elected board. The board has the authority to enforce the restrictions--even to fine you if you break the rules.

These documents are important to your decision on whether to buy. You and your lawyer will want to examine:

The declaration of condominium--also called a master deed, or the declaration of covenants and restrictions, or sometimes just restrictions--to tell you the basics about your community's land, buildings, and other improvements, the location of each unit, the common elements, and the intended use of each unit, etc. This document has to do with the physical arrangement; under laws of many states, it need not contain much in the way of operational detail.

Articles of incorporation or articles of association will give you an understanding of your community's legal setup and management structure. The articles include the power of the board to make, alter, and repeal reasonable bylaws.

Bylaws provide more detailed information. They tell how the managing board will be elected and define its duties and powers. They tell whether the board will manage the property or engage a management firm. They contain ground rules critical to settling disputes that might arise, such as how assessments and reserves are to be determined and to what extent board decisions bind unit owners.

Additional rules and regulations, which your board might have established in the course of operating the community, will give you insight into the details of community living. They might specify how parking spaces are allocated, how big residents' dogs may be, and what color draperies are allowed to show through the windows. Generally the rules and regulations govern the common elements, while restrictions on the interior of the unit are found in the declaration.
 

Higher Gift Limit Helps Reduce Estate Taxes

Federal tax laws offer you many opportunities to reduce-and even eliminate-any taxes you may owe upon death. Your lawyer can fill you in on options for your particular situation. One way to reduce your estate to below the taxable level—now $1million under federal law—is to make cash gifts while you're still alive (the technical name for such gifts is inter vivos). This year, the upper limit on these gifts has gone up. Now you can give an unlimited number of $11,000 gifts each year. You can give the gifts to as many people as you want. As long as your annual gift to each person is at or under $11,000, the gifts are tax free (you can give $22,000 tax-free gifts to each person if you give as a couple). The recipients don't have to be related to you. You can also make gifts to trusts and to charities. If you give to a charity, you can give an unlimited amount of money tax free. You should state in your will that any gifts you have given before you died to a beneficiary will not be considered an advancement (a gift that is to be subtracted from the amount a beneficiary is left in a will or trust). If you don't, the probate court in some states may subtract the amount of the gift from the amount you gave him or her in the will. For example, suppose you write a will that leaves your son $25,000. A month later you give him $11,000 for a year of college. Then, a month after that, you die. If your will didn't state that any gifts, like the $11,000, weren't advancements, the probate court might subtract the $11,000 from the $25,000, and your son will wind up with $11,000 less than you intended. If you do intend that the gift be an advancement, it's a good idea to put that in writing, so the court will reduce the amount he'll receive through your will.. In addition to their potential as a tax-saving device, such gifts may help make a small estate smaller, and thus, in some states, avoid full-fledged probate. Another advantage of giving property away before you die is that you get to see the recipient enjoy your generosity.

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Informed Consent Protects Your Rights

These days, before you undergo many different kinds of medical procedures, you are presented with a consent form. Don't sign this without thinking--it's for your protection.

Consent forms are also legally important documents, especially in medical malpractice cases. Your lawyer is your best guide as to your particular situation, but here is some general information about informed consent. In a later issue, we'll discuss specific steps to take when presented with a form.

Defining Informed Consent

Informed consent means that doctors cannot treat you until they explain the procedure to you and you agree to the treatment. Informed consent protects your freedom to make decisions about your body. It allows you--rather than your doctor--to decide whether or not to undergo a particular treatment.

Informed consent should result in a dialogue between you and your doctor. Only when you are armed with all the available information can you make an informed choice as to your options.

Informed consent is not a guarantee of a particular outcome. It is a method of allowing you to make a rational and educated decision regarding medical treatment.

How It Came About

One of the earliest cases dealt with a woman who claimed a doctor operated on her, without her consent, to remove a lump from her stomach. The woman sued her doctor and won. As the judge in that case put it:

Every human being of adult years and sound mind has a right to determine what shall be done with his own body; and a surgeon who performs an operation without his patient's consent commits an assault, for which he is liable in damages.

Properly Informed?

You are properly informed when the doctor explains to you all the facts necessary to make a knowledgeable decision regarding your medical care. This information should be given to you when are calm, sober, and preferably not medicated.

There are times of course when you will have to make a fast, nerve-wracking decision about treatment for yourself or a family member. When time is of the essence the doctor should give you as much information as possible in order to make a sound decision, but this will no doubt be less in-depth than in other, non-life-threatening situations.

If your alternatives are couched in medical jargon that you do not understand, you cannot legally consent to the treatment because, in effect, you have no idea what your doctor is talking about. To be informed, you need to be given the information in terms you can understand.

Informed consent does not mean that you can force your doctor to step outside the boundaries of good medical judgment, violate medical ethics, or perform alternative treatment the doctor considers too risky.

When Is It Required?

You do not have to give informed consent for every medical procedure performed. Informed consent is generally reserved for when:

there is a risk of death or injury;

drugs are given;

diagnostic tests (such as angiograms) are going to be performed;

a surgical procedure is going to be performed.

Informed consent applies to elective procedures, such as plastic surgery and vasectomies, as well.

Regular examinations or the taking of blood samples do not usually require informed consent, unless an HIV test is going to be performed.

What Doctors Have to Tell You

There are several pieces of information a patient needs to make a choice about treatment:

a description of the proposed treatment or procedure in terms the patient can understand;

the benefits, risks, and side effects of the treatment;

the risks of not treating the ailment;

any alternative treatments that are available, along with the risks of those alternative treatments;

the rate of success for the treatment, as well as how success is defined;

a description of the recuperation period, including a time frame and possible complications;

conflicts of interest. Patients need to know if the doctor has something to gain financially by referring the patient to a particular facility or by recommending a specific treatment.

This does not mean that the doctor has to tell you of every conceivable ache, pain, or minor side effect that may occur. It does mean that the doctor has to tell you about any facts that might cause a reasonable person to decide not to agree to the treatment. For example, a reasonable person might decide to not have surgery after finding out that it carries a 25 percent risk of paralysis.

In most states, a jury will consider four questions to determine whether a patient's consent was informed.

1. Did the patient understand enough of the information to give an effective consent?

2. Was the patient given the same information as other patients in the same situation?

3. If the patient had been given sufficient information, would he have consented to the treatment?

4. Was the patient warned about the complication that later arose?

Even if the patient did not give an informed consent, the patient cannot bring a lawsuit if the patient was not injured. In other words, if there is no harm done, the doctor cannot be punished in a court of law. You are still entitled to file a complaint with the state licensing agency against the doctor for professional misconduct, regardless of whether an injury resulted. The doctor may then face some form of discipline from that agency.

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Pre-Trial Process Can Win or Lose Case

Lawyers will tell you that careful preparation is the key to success in a trial. That means that investigations and discovery of evidence are crucial both if the case goes to trial and if it is settled before trial. (The vast majority of cases are settled, but often after the pre-trial processes have helped each side understand the strength of its case and its opponent's case.)

If you're involved in a case, your lawyer will guide you through the process. This article will look at some of the typical steps and give you some idea what to expect in the event that you have begun a lawsuit or are being sued.

Discovery

To begin preparing for trial, both sides engage in discovery. This is the formal process of exchanging information between the parties about the witnesses and evidence they'll present at trial.

Discovery enables the parties to know before the trial begins what evidence may be presented. It's designed to prevent "trial by ambush," where one side doesn't learn of the other side's evidence or witnesses until the trial, when there is no time to obtain answering evidence.

Let's say you're the plaintiff in a p auto collision case. Your suing the other driver for damages caused by an accident that you believe was caused by his negligence. The law obligates you to answer questions posed by the other driver (the defendant), as long as the questions are reasonably calculated to lead to relevant evidence. That may result in questions about your medical and work history, details of the collision and your condition when it occurred, and much more. Of course, the defendant is obligated to answer your questions as well.

Interrogatories are often the first step in the discovery process. Either party may submit written questions (interrogatories) to the other party and require that they be answered in writing under oath. So in this case, if the defendant chooses to use an interrogatory, his lawyer will send written questions to your lawyer, and you will have a period of time in which to answer.

Your lawyer might also seek written answers from the defendant, through interrogatories asking for specific information about the vehicle the defendant was driving, his driving record, any convictions he may have, his use of drugs or alcohol, etc.

Depositions often occur after interrogatories, and may be at least in part based on the information uncovered in the written evidence. They are probably the most common method of discovery.

A deposition is an out-of-court statement given under oath by any person involved in the case. It is to be used at trial or in preparation for trial. It may be in the form of a written transcript, a videotape, or both. In most states, either of the parties may take the deposition of the other party, or of any other witness. Both sides have the right to be present during oral depositions.

Depositions enable a party to know in advance what a witness will say at the trial. Depositions can also be taken to obtain the testimony of important witnesses who can't appear during the trial. In that case, they're read into evidence at the trial.

Often a witness's deposition will be taken by the opposing side and used to discredit the witness's testimony at trial if the trial testimony varies from the testimony taken during the deposition. (A lawyer might ask a witness at trial, "Are you lying now or were you lying then?")

That's why your lawyer will want to know about anything damaging to your case in advance, so that you may be prepared in case questions are asked about that topic. You aren't obligated to volunteer information, and should not do so, but you must be prepared to handle difficult questions, so that you won't be creating problems for yourself at trial.

Usually depositions consist of an oral examination, followed by cross-examination by the opposing side. Your lawyer may prepare you for the deposition by giving you a full picture of the process and how questions will be asked, suggesting how you are to dress, how you should act, etc.

Other methods of discovery include

subpoenaing or requiring the other side to produce books, records, or other documents for inspection (a subpoena is a written order issued by a court compelling a person to testify or produce certain physical evidence such as records);

having the other side submit to a physical examination (very probably the defendant will engage a doctor to examine you in the case we have been using as an example, since your physical condition is directly relevant); or

asking that a document be submitted for examination to determine if it is genuine.

As the evidence mounts, and each side gets a better sense of the strengths and weaknesses of its case, there will probably be discussions of a possible settlement. We'll discuss the settlement process in a later issue.

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