Executive summaries and small condominiums

The developer of an eight-unit condominium development does not want to fill out the executive summary. The developer said that when they planned the project, the attorney said they would not have to complete an executive summary because an executive summary is not required as part of the disclosure materials for a small condominium of up to 12 units, depending on the elections made in the declaration. What specific elections must be made in the declaration? 

According to Wis. Stat. § 703.365 (1) and (8), an executive summary, as well as other documents, may not be required as part of the disclosure materials for a small condominium provided that the declaration was drafted or amended to state that the abbreviated disclosure requirements described in § 703.365(8) apply to the project.

Budgets and RECR addenda for small condominiums

A broker listed a condominium unit in a project that has 12 units or less in the association. Are they obligated to furnish association budgets? Does the “Condominium Addendum to RECR” need to be submitted with all condo listings regardless of the size of the condo association? 

Effective November 1, 2004 a small condominium has no more than 12 units, regardless of whether they are residential or nonresidential units. A small condominium is given a series of options in Wis. Stat. § 703.365 (pages 17-18 of
www.legis.state.wi.us/statutes/Stat0703.pdf) to make the condominium less formal with fewer requirements than other condominiums, provided that the declaration of the condominium adopts one or more of these streamlined provisions. A small condominium may substitute an agreement for the bylaws, but the agreement must provide that all duties of the association rest with the directors, that meeting notice may be given in the manner best calculated to give actual notice to all unit owners, that the board will be composed of one representative from each unit, and that all actions taken by the board must be approved by at least 75 percent of the board.

The declaration of a small condominium also may authorize the use of streamlined disclosure materials that need not include an executive summary but which still would need to include a budget. If an executive summary is not required for the disclosure materials, it logically is not required as an attachment to the Condominium Addendum to the RECR. The RECR and the Condominium Addendum, however, are still required by Wis. Stat. § 709.02(2).

Executive summaries and new construction condominiums

Does a Condominium Addendum to the Real Estate Condition Report need to be provided to a buyer’s agent in a new construction condominium project? What about the executive summary? 

The executive summary is designed to be a user-friendly index that summarizes the most important information buyers want or need to know about a condominium (such as the rules for pets, parking and rentals) or directs them to the sections of the disclosure materials where that information is found. The executive summary promotes the buyers’ understanding of the purchase by creating an easy-to read summary. The executive summary is now needed for all condominiums, residential or commercial, except for small condominiums that elect abbreviated disclosure materials in their declarations. The executive summary is to be completed by the association – the declarant if the period of declarant control has not expired, or a duly authorized representative of the association such as the condominium association president.

If there is no real estate condition report (RECR) for the transaction, for example, because it is new construction that has not been inhabited, then no addendum to the RECR is required. For more information regarding the executive summary and other recent condominium law revisions, visit the WRA REALTOR^® Condo Law Resource page online at www.wra.org/condolaw.

Statutory reserve accounts and small condominiums

Is a three-unit condo building required to have a statutory reserve account (SRA)? Can it function without one? 

The SRA procedures in Wis. Stat. § 703.163 generally apply only to residential condominiums. Small condominiums (1-12 units) and mixed-use condominiums (residential and nonresidential units) are exempt from this requirement unless they opt in with the written consent of a majority of the unit votes. For a mixed-use condominium, opting in requires a majority of the unit votes of the residential units plus a majority of the unit votes of the nonresidential units.

Per Wis. Stat. § 703.163, if an association decides to have a statutory reserve account (SRA), it must record its decision with the register of deeds. For a copy of a registration form that may be used for recording, click here. 

Conversions of tenant-occupied property

Regarding condominium conversions on a side-by-side duplex, the agent understands that the tenant has a 60-day first right to purchase the unit, which gives the tenant the option to match an offer. The tenant is presently on a month-to-month tenancy. How long must the owner wait before he can require the tenant to vacate? Does the clock start when it is actually converted? 

Wis. Stat. § 703.08(1) requires an owner who intends to convert residential real property to a condominium to provide existing tenants with a written notice of the conversion. Then tenants have a first right to purchase for 60 days after delivery of the notice. The price is the same as that offered on the market, the price contained in an accepted offer to purchase the unit, or a price otherwise agreed to by the tenant and the seller.

Wis. Stat. § 703.08(2) prohibits owners from requiring tenants to vacate the property for 120 days after the owner delivers the written conversion notice. No tenants, including month-to-month tenants, may not be removed for 120 days unless they violate a covenant in a lease or fail to pay rent. Owners must also honor leases that extend beyond the 120 days.
Wis. Stat. § 703.08(3) provides that a tenant may waive his or her first right of purchase or right to remain in the unit for 120 days in writing.

Rescission rights re-triggered for amended disclosure materials

What are the sellers’ and agent’s disclosure responsibilities and is the buyer’s five-business day right of rescission resurrected if new documents are received after the five-business day period has passed? 

Any change to the disclosure materials first delivered to a unit purchaser that would materially affect the purchaser’s rights needs the approval of the purchaser per Wis. Stat. § 703.33(3m). Accordingly, the delivery of amended disclosure materials that materially affect the purchaser’s rights triggers a new five-business day rescission period under § 703.33(4).

Association obligation to furnish disclosure documents

This question is in regards to obtaining condo documents from the association and the right of first refusal. The president and secretary of the association refuse to give the broker any documentation until the seller repairs or removes some minor items from the exterior of the unit. Is this legal? They are also asking for all of the information that the broker has about the buyer. 

Wis. Stat. § 703.20(2) requires the association to provide all condominium disclosure materials necessary for the seller’s compliance with § 703.33 within 10 days of a unit owner’s request. The broker may seek consent from the buyer in order to avoid confidentiality issues if it is necessary to provide buyer information. The association should be able to point to a written requirement in the association documents to justify this request because it is not a common practice and suggests the potential for a discrimination concern.