Buying in a Small Del Rey Condo Building: How Do I Tell a Fair HOA From a Risky One?

A fair HOA in a small building is one where the owners can show you, on paper, how the building gets paid for, who makes decisions, and what is coming up next. A risky one is where those answers live in one neighbor's head, or nowhere at all. The size of the building is not the problem. The records are.

In a building with fewer than ten units, every owner carries a bigger share of every repair, every vote and every disagreement. That is why I look harder at small buildings, not less. When you know what to ask for, you can tell the difference in a few days, well inside a normal contingency period.

Most HOA advice is written with large complexes in mind. Those usually have a management company, a full board, a written budget and a reserve study that someone outside the building prepared. Small buildings often work differently.

In many small Del Rey buildings, the association is the owners themselves. One person collects dues, another calls the plumber, and decisions get made in a hallway or a group text. That can work well. Neighbors who know each other often move faster and spend more carefully than a large board ever would.

It can also go wrong in ways that are hard to see from the outside:

• Math with few owners. A roof or a sewer line costs about the same whether the building has six units or sixty. With six owners, each share is much bigger.
• One volunteer holds everything. If the person who keeps the books moves out, the records can leave with them.
• Votes can stall. When two owners disagree in a small building, a needed repair can wait for months.
• Less outside review. A small association may never have had anyone outside the building look at its numbers.

None of this means you should skip small buildings. They can offer a quieter setting and fewer shared amenities to pay for. It means you read the paperwork closely and ask the right people the right questions.

California's condo law, the Davis-Stirling Common Interest Development Act, applies to condominium projects regardless of how fancy the building is. Under Civil Code section 4525, the seller has to give you a set of HOA documents before the sale. That set includes the governing documents: the articles of incorporation, the CC&Rs, the bylaws and the operating rules. If the association was never incorporated, the seller gives you a written statement saying so instead. The package also covers budget and assessment information. If you ask, you are also entitled to the board's approved meeting minutes from the prior 12 months.

If the seller does not have current copies, they can request them from the association, which has 10 days to provide them after a written request. The seller pays for that package, not you.

Here is what I read for in a small building:

• Is the association incorporated, and is it current? A note that it was never incorporated is not a deal-breaker by itself, but it tells you how informally the building has been run.
• Does the budget look real? A budget that lists only insurance and water, with nothing set aside for the roof, paint or plumbing, is a warning.
• What do the minutes talk about? Minutes that mention a leak, a dispute or a repair that keeps getting tabled are often more useful than the budget itself.
• Do the CC&Rs match how people live? Rental limits, pet rules and who maintains balconies and patios should be written down, not just understood.

Reserves are the savings an HOA keeps for big, predictable repairs, like a roof, exterior paint, a water heater system or the driveway. In a small building, a thin reserve is the most common way a buyer gets surprised after closing.

California's Civil Code section 5550 asks the board to have a visual inspection of the major components the association maintains at least once every three years, and to review the reserve study every year. There is a narrow exception for some associations, so a small building may not have a formal study at all. Either way, ask directly:

• When was the last reserve study, and who prepared it?
• How much is in the reserve account today?
• What big repairs are expected in the next few years, and is the money there for them?
• Has the building ever used a special assessment to pay for a repair?

A building that answers these clearly, even with modest savings and a plan, is in a much better place than one that says the roof is fine and has nothing set aside. If you want to go deeper on reading a study, my guide to reading an HOA reserve study walks through it line by line.

Larger associations often have an outside accountant look at their numbers every year. California's Civil Code section 5305 requires a review of the financial statement by an independent licensed accountant for any association whose gross income is more than $75,000 in a fiscal year, and that review goes to every member within 120 days after the year ends.

Many small buildings collect less than that in dues, so no outside review is required. That is not a red flag by itself. It just means you should look at the bank statements and the payment history yourself, or with your own adviser. Ask for:

• The last 12 months of bank statements for the operating and reserve accounts.
• A list of any owners who are behind on dues. In a six-unit building, one owner who stops paying changes the math for everyone.
• Copies of recent invoices for repairs, so you can see what has actually been spent.

When I represent a buyer in a small building, these are the questions I make sure get answered in writing:

1. Who manages the building day to day? A paid manager, a volunteer owner, or nobody in particular.
2. Where are the records kept? In a shared folder the association owns, or on one person's laptop.
3. What is the master insurance policy, and what does it cover? Ask for the declarations page and compare it with what the CC&Rs say the association must insure.
4. Are there any disputes or lawsuits? Between owners, with a contractor, or with the city.
5. What repairs were discussed and not done? The minutes usually tell you, if you read them closely.
6. How are balconies and other elevated areas handled? In buildings that have them, California has inspection rules worth understanding. My article on balcony inspections and condo sales explains how they come up in a sale.

A fair small HOA answers these calmly, with paper. A risky one gets vague, says everyone just handles things, or cannot find the records. When the answers are thin, that does not always mean walk away. It may mean a different price, a credit, or a longer look before you remove your contingencies.

With a small building, I start asking for the HOA package and the minutes as early as the contract allows, so you have time to read them before deadlines get close. I go through them with you page by page, flag anything that needs a follow-up question, and help you decide what is worth negotiating. You should never feel rushed into owning part of a building you do not understand.

If you are weighing a condo in Del Rey or anywhere else on the Westside, my guide to HOAs when buying a condo covers the basics for any size building, my guide to buying a condo on the Westside covers the rest of the purchase, and the Del Rey neighborhood guide gives you a feel for the area. When you are ready to look at a specific building, send me a note here. Call or text me at 310.708.7717. I'm here when you're ready.