Disclosures and Issues When Buying Property Subject to an HOA

Most sellers of homes know that they have to make certain disclosures to potential buyers, disclosures that may relate to the condition of the property. But many sellers—and even their agents—often overlook the requirement of disclosures of the homeowners association (HOA) restrictions on property to a buyer.

HOA Disclosures

In every real estate purchase for property that is subject to an HOA, the seller must give information about the HOA to the buyer before closing. This includes many basics that you may imagine must be disclosed such as contact information for the HOA, and the governing documents and rules and regulations for the HOA.

But the obligation to disclose goes beyond just these disclosures.

The seller also must disclose the financial statements of the HOA, which most HOAs will provide to sellers on request. This is important, because an HOA that has insufficient reserves, or which has poor financial management, is an HOA that could end up levying expensive special assessments in the future.

Special assessments can also happen, when an HOA is in legal trouble, or when an HOA faces a judgment. That’s why a seller also needs to disclose to the buyer any pending lawsuits or claims that the HOA may be facing.

This can include lawsuits between the HOA and residents, or between the HOA and government agencies or contractors or other businesses.

If there are any fees associated with the purchase of the property that are assessed by the HOA, or any special assessments which may be owed when closing, those must be disclosed as well.

If any of these disclosures aren’t made, the Buyer can void and walk away from the contract, as early as three days before the closing, or even after closing (thus rescinding the contract), without penalty.

Other Information to Ask For

Although not legally required to be disclosed, buyers would be smart to ask about increases in HOA dues throughout the previous 5-10 years, to try to predict whether the buyer can expect dues to increase, and how much they will increase in the future.

One thing buyers should always determine is whether or not the seller, at the time of closing, actually owes HOA dues (that is, whether there are dues that are past due, late, or unpaid). The HOA maintains the legal right to foreclosure on the property, even after the buyer purchases it, and even though it was the seller, and not the buyer, who owned the property when the dues were originally assessed.

Typical public records searches often will not disclose these unpaid HOA dues; they must be requested directly from the HOA.

Remember to inspect the property—not just to ensure that the property is fit for purchase, but to make sure the seller hasn’t made any modifications to the property that violate HOA regulations—problems you as the buyer could get stuck having to repair or alter or fix.

Buying property that is subject to an HOA? Make sure your closing happens without problems. Call the West Palm Beach real estate lawyers at The Law Offices of Larry E. Bray today for help buying or selling property.

Sources:

spectrumam.com/are-you-buying-or-selling-a-home-in-an-hoa-heres-what-you-need-to-know/

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/Sections/0720.401.html