When investing in a condominium project, whether you’re buying a single unit or several, it’s important to be aware that condo buildings are run by a condominium association providing various services, one of which is making sure the association rules are being followed by its owners.

These rules can be rather harmless ones such as assigning parking place or more strict versions on the type of outdoor furniture that you can put on your deck. Anyone investing in condos is aware of these various covenants and knows to review them thoroughly before making a purchase decision.

Another important function of the association is to protect the rights and property of the individual owners. Owners have full possession of all the interior space of their units, called “walls in.” Outside areas, called common areas, are owned jointly and equally by condominium owners. The sidewalks, garden areas, swimming and health club facilities are all common areas. When the common areas are breached or there is a disagreement with a service provider, legal action on behalf of the condo owners can be initiated.

For instance, the association contracts with ah HVAC company to install brand new cooling units for the entire complex. Three weeks after installation, the system breaks down. The contractor claims he is not responsible, that the manufacturer is liable for the non-working system. The association then files a lawsuit against the contractor to protect the interests of the owners. And that’s a good thing.

When an association gets a bit overzealous regarding filing a lawsuit, it can hurt the development more than it helps. How so? When a condominium association is involved in any current or pending litigation, banks won’t loan against the project and anyone selling their unit must wait until the lawsuit has made its way through the courts before their buyers can obtain financing.

Remember to review any condominium rules before investing in any project, and find out if there have been any recent lawsuits involving the development and if so, how many. If you’ve got an overactive association as it relates to lawsuits, it may be better to move on.