When reviewing condo listings, the first documents requested are the HOA financial statements and reserve study from the past 2-3 years. In areas like Lexington, where older townhomes and new condos are mixed, these documents reveal much about the property. By examining the financial statements, you can check whether operating expenses and reserve balances are separated and how high the delinquency rate is. Skipping this step and deciding based only on price and location can lead to unexpected bills just months after moving in.

The monthly HOA fees for condos in the Lexington area generally range from $400 to $600. This is based on data compiled by the Massachusetts real estate media outlet massrealestatenews.com, and when considering the greater Boston area, the range can be as wide as $200 to $1,000. This includes maintenance of building exteriors and roofs, master insurance premiums, landscaping and snow removal, trash collection, and contributions to the reserve fund. Newer condos with more amenities tend to have higher management fees.

According to Massachusetts condominium law (M.G.L. c.183A §10), all condo associations are required to maintain an appropriate level of reserve funds in a separate account from operating funds. However, the law does not specify a certain amount or percentage that must be maintained; it varies based on the age of the building and estimated future replacement costs. While there is no obligation to obtain a reserve study, the industry recommends creating a long-term capital expenditure plan through a professional reserve study. There are also regulations requiring management companies or boards to provide financial reports at least quarterly.

If the reserve funds are insufficient when it comes time to replace roofs, plumbing, or elevators, all residents may face a special assessment charged at once. In areas like Lexington, where the school district is desirable and attracts Korean families, it is common to see cases where buyers only consider the purchase price and later receive special assessment bills in the thousands of dollars after a few years. Therefore, it is helpful to have a checklist of items to verify before signing a contract.

• Recent 2-3 years of financial statements and budgets
• Reserve fund balance and recent reserve study status
• Delinquency rates and ongoing litigation status
• CC&Rs regarding rental restrictions and pet regulations
• Commercial space ratio and its impact on mortgage approval

Mortgage lenders also consider the financial health of the HOA when reviewing condo purchases. If the delinquency rate is high or the reserve fund ratio is low, or if there is ongoing litigation or the commercial space ratio exceeds the threshold, the condo may be classified as non-warrantable, leading to loan denial. Fannie Mae's condo project standards set these criteria, and buyers may find themselves blocked even if they find a unit with good conditions. In competitive areas like Lexington, where there is a school district premium, it is wise to secure time to review these documents before signing a contract.

It is also important to read the HOA regulations, specifically the CC&Rs and bylaws, before signing a contract. Some condos in Lexington have limits on the rental unit ratio or require new buyers to live in the unit for a certain period before allowing rentals. For investors considering rental income, this single clause can disrupt the entire plan. Similarly, restrictions on pet ownership or approval processes for renovations should be confirmed through the management office before signing the sales contract.

Consider the example of a family moving from another state to Lexington. In their previous state, condo management fees were around $100. Upon seeing a $450 listing in Lexington, they were initially hesitant. However, after reviewing the financial statements, they found a high reserve fund ratio and no history of special assessments. This meant that even though the fees were high, they were predictable expenses. Conversely, another listing with a lower fee of $300 had almost no reserve funds. Ultimately, this family chose the property with the higher fees. This illustrates why it is difficult to make judgments based on a single number.

For families preparing to move to Lexington from another state, it is also important to note that the tax and insurance systems they are familiar with may differ from Massachusetts standards. Property tax rates and condo insurance requirements vary by state and county, so it is best to confirm specific details with a professional. School district assignments can also change frequently, so be sure to check the assigned schools for any addresses of interest. This article is not investment or legal advice, and it is recommended to consult with a real estate professional and attorney before making any actual contracts.