Purple Houses, Crowing Roosters, and Bad Roads

Saturday, November 14, 2009

Dear Reader,

In the past weeks in her "Twelve Things you Need to Know to Do…and Then Do" series, Margaret strongly recommended that you:

1. Engage your own independent legal advice,
2. Buy the right title insurance,
3. Scrutinize your sale contract,
4. Investigate your title deed carefully,
5. Check permits and approvals,
6. Make sure you have access,
7. Get a handle on the infrastructure essentials,
8. Dig deep into your developer’s background.

This week, we look at master plans and CCR/HOAs.

Tip #9: Check the Master Plan

With pre-construction developments, make sure that amenities promised in the master plan are in writing in your contract, if possible, with timelines and standards… the swimming pool, the clubhouse and landscaping. Imagine how you would feel if you only got some or all of those promised amenities…a small pool rather than the Olympic-sized one, or no pool at all.

Amenities are usually the last items installed in developments, and the first that suffer if a developer is running short of cash.

If the developer has reserved areas or green space, see if they will be preserved, or used for future development. Similarly, if there’s empty land next to the property, find out what plans are in place for it.

Check the local municipal developmental plan, if there is one, and see if roads, or factories, are planned nearby. Similarly, check out the local area…is there a municipal dump close by, or a truck park, close to your new home?

Tip#10: Check the CCRs/HOAs

With the CCR’s (Covenants, Conditions and Restrictions), make sure you can live with the rules.

Keeping certain pets may go against CCR rules. Working from home usually carries restrictions, related to the type of work you do. See what standard of maintenance you are obliged to carry out on the exterior of your property—and what remodeling is allowed.

Perhaps subleasing your property, for vacation rentals, interests you. Don’t assume that the CCRs allow that.

Make sure that the rules are tight enough so what your neighbors do won’t adversely affect you. If you don’t want a purple three-storey house next-door…roosters in the neighbor’s yard waking you in the early hours…check those CCRs. I’ve seen all of those, in developments without strict CCRs.

Who will manage the HOA (Home Owner’s Association) initially? If it is the developer, when is the handover date? What are the projected monthly dues? Can the HOA enforce collection? One development I saw had roads and pavements in terrible condition, with potholes and badly worn surfaces. Maintenance was impossible as owners did not pay their monthly dues, and the CCRs had no mechanism for enforcing payment.

Who will manage the HOA finances? What checks and balances are there for ensuring that funds are managed correctly? Around 20-25% of your monthly dues should go into a reserve fund, for covering major problems, or you may get a large one-off charge for those when you can least afford it.

Are the CCRs and HOAs tied into the property deed? Are they enforceable against future owners if the current owner sells?

Don’t assume that because CCRs are in your deed that they are enforceable. They must also be set up under a proper statutory regime that varies country by country.

Don’t think that your due diligence process is just boring paperwork. I always recommend that you visit before you buy. This is a central part of your due diligence. It’s also fun. This is where Pathfinder Chill Weekends come in.

A Chill Weekend is nothing more than an opportunity to enjoy a short vacation in exchange for allowing a developer the opportunity to showcase a property or development he is promoting. No strings, no high-pressure sales tactics, no hard sell, just a chance to investigate some real estate opportunities (and check out the beach, of course!).

Best of all: the developers pick up some of the tab.

This December, our friends in Belize will host a Chill Weekend.

Orchid Bay Belize

December 11th-13th: Orchid Bay, in Belize, will host a three-day escape to their tropical paradise. All you have to do is book a return flight to Belize City and the guys from Orchid Bay will pick you up from the airport and provide all of your tour-related transportation, meals, and accommodation for just $299. That price includes a tour of Mayan ruins, and a Hawaiian-style pig roast on the beach. A $10,000 discount is available on casitas until December 13th, bringing the price for these little homes down to $149,000. Lots start at $39,000. Get a full itinerary and information pack here.

Ronan McMahon