Closing Tip of The Week

Written by Joel Gerber. Posted in Closing Tips, Real Estate


Important Change To The 2017 Community Association Disclosure – Listing Agents Beware


Back in May 2016, I posted an article regarding disputes arising between the buyer and seller in connection with the Community Association Disclosure (“CAD”). The issue that frequently caused problems was that while the seller was filling out the CAD to the best of his or her knowledge, the seller either (1) failed to include all of the relevant fees, charges, etc. on the CAD or (2) was unaware of some of the same (i.e., transfer fee). If the seller failed to include a fee or charge on the CAD, arguably it was not clear whether the buyer or seller was responsible for paying those fees at closing. My advice to the selling agents was to attempt to contact the HOA to confirm the accuracy of the information included in the CAD during the due diligence period.

While knowing the fees that will be charged to the buyer by the HOA at closing still is critical to allow you to negotiate the best deal you can for your client, the 2017 CAD has tried to clear up the question, “Who is responsible for paying HOA fees, charges, etc. that the seller didn’t know about or failed to disclose in the CAD?” There is now no question!

The third paragraph of the 2017 CAD states:

IN THE EVENT SELLER FAILS TO DISCLOSE HEREIN (AND AS OF THE BINDING AGREEMENT DATE) THE FULL AMOUNT OF ANY FEES, ASSESSMENTS OR CHARGES DUE AND PAYABLE TO THE COMMUNITY ASSOCIATION OR ITS MANAGEMENT AGENT ON OR BEFORE THE CLOSING, SELLER SHALL BE RESPONSIBLE FOR PAYING SUCH UNDISCLOSED FEES, ASSESSMENTS AND CHARGES AT CLOSING.

The paragraph added above now makes it very clear that if the CAD available to the buyer when the purchase and sale agreement is bound is not 100% accurate then the seller is responsible for paying any undisclosed fees or charges.

So what does that mean for you as a listing agent? It means that unless you want a very unhappy seller, you will need to ensure that your client contacts the HOA before (or soon after) listing the home to obtain all of the estoppel letter expenses, transfer fees, HOA dues and any other charges to make sure that the CAD provided is accurate. To protect yourself, I would email your client the CAD and include in the email that they need to obtain this information and explain to him or her that if he or she fails to disclose any fees on the CAD he or she will be responsible for paying them at closing.

The bottom line is that the language added to the 2017 CAD now protects the buyer in the event of non-disclosure by the seller for any reason. Listing agents beware!

As always, if you need help with anything at all, please do not hesitate to contact me anytime at (912) 484-1996 (even nights and weekends) or email me at jgerber@brannenlaw.com.

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