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New Law Would Cap Condo Estoppel Fees

New Law Would Cap Condo Estoppel Fees

There are many pre-closing costs incurred in residential real estate closings. These costs are generally fronted by the title company or the buyer’s attorney.  If all goes well and closing occurs, the costs are reimbursed.  However, too often, something goes wrong and the closing doesn’t happen.  We, and I include myself and my firm in this category, closing agents are often stuck with these unreimbursed costs.  Hopefully, our buyer will find another house and we’ll have an opportunity for reimbursement later.  That is not always the case.  Fortunately, many of these pre-closing expenses are small.  One potentially large expense is the estoppel letter from the condominium association or HOA.

Condo and HOA estoppel letters are important parts of residential closings. These tell us whether the seller is current in payment of assessments of if there is a collection action pending that has not yet shown in the title search.  The estoppel confirms the amount of the assessments and how much has been paid to date so that proper pro-rations can be made on the closing statement.  And, hopefully, the estoppel will provide other information, like whether the association has a right of refusal or other approval or purchase rights.

For the work of preparing and providing an estoppel letter, the association or management company usually charges a fee. This fee is unregulated in Florida and we see fees today ranging from as low as $100 to over $450 or even higher if a rush is required.  These fees almost always have to be paid up front.  “Rush” cam mean as much as 2 weeks from the date of request.

HB 483 and its companion in the Senate, SB 398, propose to cap estoppel fees, promulgate a from estoppel which would contain mandatory, standard information and set deadlines for providing completed estoppels to the requestor. In addition, the fees would be payable at closing and out of closing proceeds, relieving the burden from the closing agent.

The “Home Tax Bill” would amend F.S. Sections 718.116, 719.108 and 720.3088, the Condominium, Cooperative and Homeowner Association Acts, respectively. The Act would shorten the time period that Associations have to provide estoppels from 15 days to 10 business days, a minor adjustment.  More importantly, the Act creates a mandatory estoppel form which contains the information an association must provide in its estoppel.  This would include whether there are any existing rules violations pertaining to the unit, the association’s approval requirements for sale or lease of the unit, what utilities are included in the payment of assessments, the parking space and storage unit assigned to the unit, the regular periodic assessment and date paid through and the date the next installment due, if delinquent, the name and contact of the attorney, itemized list of all other assessments and capital contributions due and whether there are any rights of refusals.  The cost of estoppels would be capes at $200 for non-delinquent units, plus $100 for “rush” requests and plus $200 for delinquent units.

Community association groups and attorneys representing community associations oppose the Act arguing that is places too great a burden on associations and that the cost of unpaid estoppels would be passed on to unit owners. These arguments are weak.  For associations which are managed by professional, paid managers or management companies, estoppel information is or should be readily available, regardless of how the manager is staffed.  In fact, most management companies have employees who are dedicated exclusively to providing estoppels.  Further, a large percentage of the information that would be required on the new form is in fact, form language.  The financial information is the same information that is provided today.  There is no real extra burden.  Large property management companies quietly state that estoppel departments are a profit center to their business.  Their associations won’t suffer.  Self-managed associations are generally small and don’t get a large number of requests, certainly, not at one time.  For the few that they do every year, the timing requirements won’t put these associations out any more than they already are.

The risk of unpaid fees is not a real risk either. The Act provides that the owner of the unit is ultimately responsible for the fee.  If it remains unpaid for any reason, the association may collect it as an unpaid assessment.  That means the association may lien and ultimately foreclose the unit if necessary.

The Act brings fairness in a business transaction that was one sided in favor of property managers. Community associations have not really benefitted from estoppel fees and should not oppose the Act.  This is not the first time this legislation has been proposed.  Community associations should join the Florida Association of Realtors in supporting it as unit closings will ultimately go faster and smoother.

David Blattner

dblattner@beckerlawyers.com

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