Q. What is a condominium and how is it formed?
In Rhode Island, a condominium is any real estate project which includes individually owned units (i.e. a residential unit) and common elements (i.e. general common elements and limited common elements) that are owned by the unit owners as tenants in common.
A condominium is created in Rhode Island by recording a declaration of condominium with the appropriate office in the city or town where the project is located. The declaration must be drafted in accordance with the Rhode Island Condominium Act (the “Act”) for all condominiums created after July 1, 1982.
Q. What are the bylaws?
The bylaws are the rules of the condominium. The bylaws are enforced by the association’s elected officials. The bylaws can be changed with a certain percent vote of the unit owners of the association. A buyer should always review the bylaws carefully prior to entering into a purchase and sales agreement. Buyers are sometimes surprised to find out that representatives of the association are allowed to enter the buyer’s unit; pets are not allowed; or a buyer is not allowed to alter the exterior of their unit without the permission of the association.
Q. What is a condominium unit? What is a general common element? What is a limited common element?
A condominium unit (i.e. residential living space) is the area that a unit owner has exclusive ownership interests in.
A general common element is owned by all of the unit owners as tenants in common with each other and all unit owners have the right to use and enjoy a general common element (i.e. a road).
A limited common element of a condominium is owned by all unit owners as tenants in common with each other. However, only one unit owner or a limited, specified group of unit owners have the right to use and enjoy a limited common element (i.e. a patio, driveway, or porch).
Q. What is a condominium purchase and sales agreement?
A condominium purchase and sales agreement is a contract to buy and sell a unit. Many residential sellers will use a standard purchase and sales agreement form. However, there are a many different purchase and sales contracts available. It is always advisable to have an attorney who is experienced with condominium law to review or draft a purchase and sales agreement prior to signing any such agreement.
Q. What is a public offering statement?
A public offering statement is a summary of the declaration and includes important information relating to the condominium. A public offering statement must be drafted in accordance with the Rhode Island Condominium Act for all condominiums created after July 1, 1982. A buyer has the right to cancel the purchase and sales agreement within 10 days after the receipt of the public offering statement. A seller who is required to deliver a public offering statement to the buyer will face penalties prescribed by the Act if the seller fails to provide a public offering statement.
Q. Is a public offering statement required prior to the closing of all condominiums?
A public offering statement is required by any declarant or person who is in the business of selling real estate when that declarant or person offers a unit for sale on his own account to a purchaser of a condominium unit.
A public offering statement is not required in the following instances: i. if the condominium contains 12 units or less, is not subject to further development rights, and the declarant has owned the units for more than 2 years from date of first sale; and ii. nonresidential projects where all of the units are nonresidential or in residential projects where waived by agreement; and in the following instances: disposition or transfer by gift; court order; by a government agency; foreclosure or in lieu of foreclosure; disposition or transfer to a person in the business of real estate who intends to resell the unit; and when the purchase and sales agreement may be cancelled without penalty by the buyer.
Q. What is a condominium resale certificate? When is a resale certificate required prior to the closing?
A resale certificate is prepared by the association upon the request of a unit owner who is selling his or her unit. The resale certificate contains important information and must be drafted in accordance with the Rhode Island Condominium Act.
A resale certificate is required for all sales when a public offering statement is not required. However a resale certificate is not required if a public offering statement is exempt as explained in the previous question.