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  1. #1
    Join Date
    Jul 2006
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    5

    Default What is a Home Seller's Responsibility for a HOA Special Assessment

    I recently sold a condo that had just settled an outstanding litigation with the builder in December 2005. The lawsuit was settled in the favor of the homeowner's association and we were awarded an amount, to be paid in 4 installments, over 2 years. With the announcement of the settlement the HOA also levied a special assessment of $5,000 to each unit to replenish the operating fund. We paid the special assessment.

    Sometime around the end of April 2006 we placed our condo on the market. The HOA filled out the required disclosures and supplied the essential paperwork, such as the CC&Rs, board minutes for the last year, recent financial statements, budget for 2006, info related to the settlement of the litigation, etc. Additionally the HOA stated that there were no special assessments that were pending.

    We accepted an offer on our condo on May 15, 2006, which stipulated a 30 day close. Expecting to close on June 14th, we started the process of moving out of our condo on June 4th and had the mail forwarded to our new address starting on June 12th. However, we were informed by the buyers on June 9th that they would not be able to meet the original close date of June 14th and that they needed more time to secure financing. We signed an extension to amend the close date to June 22nd, with the buyers paying PITI and HOA fees up to that date. Because of a series of other delays, all originating from the buyer's side, they signed the loan docs on June 26th. We didn't close until July 3rd.

    On June 29th we received a letter from our HOA at our new address. Naturally we assumed that it was the bill for the HOA dues for July and did not open it, knowing that the sale was already a done deal. The envelope was postmarked June 21st at our old location and postmarked again with a date of June 28th at the post office of our new city.

    While cleaning up our office yesterday (July 6th) I opened up the letter from the HOA, with the intention of throwing it out. The letter essentially stated that additional repairs were discovered and that the HOA did not have the funds to cover the new repairs, requiring another assessment from the condo owners. The letter itself was dated June 19th.

    What type of exposure do we have sellers have with respect to this situation?

  2. #2
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Re: Special Assessment

    So we can speak to the practical, what is the amount of the new assessment? (Ballpark figures are fine.)

  3. #3
    Join Date
    Jul 2006
    Posts
    5

    Default Re: Special Assessment

    We have not received that information yet..however, based upon their estimate of new expenses related to the re-construction, we estimate it is around $12K

  4. #4
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    Sep 2005
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    98,846

    Default Re: Special Assessment

    If it were me I would contact the buyer and explain that I had received the notice of the new assessment subsequent to the closing. I would also forward them the correspondence, and let them investigate the amount. I would hang on to the original letter and envelope, in case this ends up in court. I would also consult a real estate lawyer, have the lawyer review the documentation from the sale, and see if this is covered by any of the provisions in the various contracts.

  5. #5
    Join Date
    Jul 2006
    Posts
    5

    Default Re: Special Assessment

    Thanks. We have just drafted a letter to the HOA, with a copy to the buyers, informing the HOA that we had no indication that an assessment was pending until the receipt of the letter, which was opened after the close of escrow.

    Paragraph 18 of the sales contract discusses HOA special assessments:

    "Unless otherwise agreed in writing, the following items shall be PAID CURRENT and prorated between the buyer and seller as of close of escrow: real property taxes and assessments, interest, rents, HOA regular, special, and emergency dues and assessments imposed prior to Close of Escrow. The following items shall be assumed by buyer WITHOUT CREDIT toward the purchase price: prorated payments on Mello-Roos and other Special Assessment District bonds and assessments and HOA speical assessments that are now a lien but not yet due. "

    What exactly does the bolded statement mean?

  6. #6
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    Sep 2005
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    Default Re: Special Assessment

    It seems pretty clear. The buyer is responsible for:
    • prorated payments on Mello-Roos and other Special Assessment District bonds; and
    • assessments and HOA special assessments that are now a lien but not yet due

  7. #7
    Join Date
    Jul 2006
    Posts
    5

    Default Re: Special Assessment

    HOA special assessments that are now a lien but not yet due

    How would our special assessment fit into this statement?

  8. #8
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Re: Special Assessment

    Is the assessment in the form of a lien? Is the lien due? From what you said, it appears the answer to the second question is "no", and the answer to the first is "probably not".

  9. #9
    Join Date
    Jul 2006
    Posts
    5

    Default Re: Special Assessment

    Aren't all HOA assessments a "lien", with some of them being regular (the monthly dues) and some special, like the one that was levied?

  10. #10
    Join Date
    Sep 2005
    Location
    Behind a Desk
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    98,846

    Default Re: Special Assessment

    How can it be a lien if no assessment has yet been made? It sounds like the notice of a probable future lien or assessment. As I said before, consult a lawyer so you can get a solid answer.

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