What to Include About HOAs in Purchase Offers

A real estate attorney advises practitioners about dealing with condo or HOA associations.

March 1, 2004

As a Florida real estate attorney, Hank Sorenson represents brokers and salespeople, among other clients.

Too bad they don’t always heed his advice.

Take the pitfalls of a written offer when a condo or HOA association is involved, for example.

Real estate practitioners should know about community associations because nearly 42 million Americans live in condos, coops, and communities governed by such associations. More than 200,000 condominium, cooperative, and homeowner associations have been formed over the past 70 years, and about 50 percent of new homes in metropolitan areas are developed in a planned community format, according to the Foundation for Community Association Research.

But many real estate professionals believe they can operate as if all property is single-family and contracts are still one-page long.

“I had a risk management seminar with a brokerage in November,” recalls Sorenson. “I told the managing brokers that whenever their selling salesperson had a buyer, and a condo association or HOA was involved, that the initial offer should have an addendum making the contract contingent on receipt and satisfactory review of the last six months of board minutes.”

The purpose, says Sorenson, is that the board minutes would disclose all potential assessments and other minute details about the community that the seller might not know about or disclose.

“One of the managers just called me,” says Sorenson. “His selling salesperson has a buyer who got a condo inspection (on a $80,000 condo) that disclosed the roof was in bad shape, but it was watertight (so there was nothing to repair for purposes of the repair limit).

“The next day, the buyer had an interview with the president of the condo association to be approved for admission, at which time she brought up the roof issue,” Sorenson says. “The president acknowledged it and said that the board had discussed the matter at its last two meetings, and there was probably going to be a $1,000 assessment proposed in the next two months to be voted on by the board.

"The buyer went back to the seller with this info, and the seller claimed she had never been to any of the meetings nor seen the meeting minutes, so she had no knowledge of this (which is entirely plausible) and therefore couldn’t disclose it,” says Sorenson. “The selling salesperson has egg on her face now and the buyer is upset, but she has no remedy against the seller nor any ability to get out of or even renegotiate the sales contract.”

You guessed it; the selling salesperson had failed to ask for the six months of minutes before writing the purchase offer. Once the offer was accepted, it was too late for the buyer because the roof did not meet the repair limit.

While he hates to say, “I told you so,” Sorenson reminded the manager of the seminar he taught last November. The manager did indeed remember, and told Sorenson, that asking for six months of minutes is now going to be “office policy.”

(c) Copyright 2004 Realty Times. Reprinted with permission.

Blanche Evans is a writer/editor and CEO of evansEmedia. Formerly, she was a senior editor with Realty Times, where she was named by REALTOR® Magazine as one of the most influential people in the real estate industry.

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