What should I check in a Sherman Oaks condo's HOA finances before buying?

Request the financial documents early

Ask your agent to request a complete HOA disclosure package and identify any additional records needed for your review.

Useful documents include:

• The current annual budget report and reserve funding disclosure.
• The latest full reserve study and annual updates.
• Recent balance sheets and income-and-expense statements showing actual results against the budget.
• The most recent year-end financial review or audit, if available.
• Information about overdue dues, outstanding loans and unpaid bills.
• Notices of approved assessments or dues increases.
• Recent board meeting minutes, preferably covering at least the past year.
• Insurance summaries and relevant inspection or engineering reports.

A budget shows what the association plans to collect and spend. Financial statements help show what actually happened. You need both.

Check whether regular income covers regular expenses

Review whether dues and other recurring income adequately support operating expenses and planned reserve contributions.

Look for repeated deficits, rising unpaid bills or routine expenses being covered by transfers from reserves. Ask whether any borrowed reserve funds have a documented repayment plan.

Compare actual expenses with the budget, particularly insurance, utilities, management, maintenance and repairs. A budget that repeatedly understates costs may point to future dues increases.

Low dues are not automatically a benefit. They may reflect efficient operations, fewer services or insufficient funding. Higher dues also need explanation: what do they cover, and is the association maintaining the property appropriately?

Read the reserve study alongside the reserve balance

Reserves are funds set aside for major repairs and replacements. The reserve study estimates the timing and cost of work on components the HOA is responsible for maintaining.

Depending on the building, those components may include roofs, elevators, plumbing, exterior surfaces, garage systems, pools and waterproofing.

Ask:

• When was the study last updated?
• Do its cost estimates reflect current conditions?
• Which major projects are expected in the next several years?
• Is the HOA making the recommended contributions?
• Will projected cash be available when the work is due?
• Have newer inspection findings been incorporated?

California generally requires qualifying associations to conduct a reserve study with a visual inspection at least every three years and review the study annually.

Do not rely on the “percent funded” figure alone. It compares reserve assets with an estimate tied to the deterioration of components; it does not guarantee that enough cash will be available for a particular project. Timing, assumptions and actual building conditions matter.

Investigate special assessments and deferred work

Ask about assessments that are approved, proposed or being discussed, along with major repairs that lack a funding plan.

For each assessment, establish:

• Its purpose and the underlying repair or expense.
• The amount allocated to the unit.
• Payment dates and any remaining installments.
• Whether the amount is based on bids or preliminary estimates.
• Whether additional assessments may be needed.
• Whether the work has started or been completed.

A special assessment is not automatically evidence of poor management. It may fund necessary work responsibly. Repeated emergency assessments or substantial deferred maintenance deserve closer investigation.

If an assessment affects the unit you are buying, have the purchase documents clearly address responsibility for payment. Do not assume the seller will pay every remaining installment.

Read the meeting minutes for financial context

Meeting minutes can reveal issues that are not obvious from the current dues or reserve balance.

Look for discussions of:

• Recurring leaks or plumbing failures.
• Roof, balcony, walkway or garage repairs.
• Insurance renewal difficulties.
• Litigation and legal expenses.
• Owner delinquencies.
• Postponed projects or rejected funding proposals.

For a Sherman Oaks building, ask specifically about any applicable balcony inspection findings, seismic retrofit obligations or outstanding City notices. Have the HOA provide relevant reports and explain how required work will be funded.

A reserve study is a financial planning tool, not a substitute for a structural inspection.

Review insurance and potential owner exposure

Ask an insurance professional to review the master policy’s coverage, exclusions, limits and deductibles, along with the coverage you would need for your unit.

Find out whether the HOA has experienced a significant premium increase, cancellation or nonrenewal, and whether the budget reflects its current insurance costs.

Clarify whether earthquake insurance exists rather than assuming it is included. Also ask how an uninsured loss or large deductible could be allocated to owners.

Individual loss-assessment coverage has its own limits and exclusions. It should not be treated as protection against every HOA assessment.

Confirm financing eligibility before committing

Your mortgage approval depends partly on the condo project, not just your income, credit and down payment.

Fannie Mae identifies financial health, unresolved critical repairs and inadequate master insurance as potential project concerns. Ask your lender what review is required and whether any issues remain unresolved.

Do not assume that another owner obtaining a mortgage previously means your loan will qualify today. Requirements, insurance and building conditions can change.

Even if you are paying cash, financing difficulties may affect the pool of buyers when you eventually sell.

Decide whether the total obligation fits your budget

Estimate your mortgage payment, taxes, unit insurance, dues and known assessments. Then consider whether you could absorb a reasonable increase or unexpected expense.

Your agent can organize documents, identify questions and coordinate follow-up. An HOA attorney, CPA, reserve specialist or engineer may be appropriate when the records reveal legal, accounting or building-condition concerns.

Resolve significant questions within your contractual review period. The goal is to understand both the condo you are buying and the shared financial obligations that come with it.