Get a Florida Estoppel Letter or Risk Paying the Seller Debts!
Get a Florida Estoppel Letter or Risk Paying the Seller Debts!
One of the frequent questions we receive from home buyers is “Do I have to pay the seller's HOA or condo debt?” Unless the buyer agrees to pay it in the contract, the answer is “No”. The buyer does not have to pay for it! Unless, someone screws up ordering it or reading it…well, that's another juicy story.
Read about that below in our “Estoppel Mistakes True Stories” section.
Statistics show that 3% or $40,000 Million of U.S. households live in a HOA/Condo community association. In Florida, the seller's liability can be transferred to the buyer if an Estoppel Letter is not received. This is vital to the health of the home buyers wallet…
What is a Florida Estoppel Letter?
A Florida estoppel letter also called estoppel certificate is a legal document that can be relied on for the seller’s current financial status about what is owed to the Homeowners Association (HOA) or Condo Association. This document is used in the real estate transaction to determine if the HOA/Condo fees or assessments are paid up to date by the seller.
What does an Estoppel letter include?
As of 2017, the State of Florida standardized what is included in the Florida Estoppel letter:
- Regular Periodic Assessments Paid Through Date.
- Next Installment due.
- Late fees and Interest.
- Special Assessment and upcoming schedule, if applicable.
- Capital Contribution, Resale Fee.
- Transfer Fee, or other Fees.
- Parking Space or Garage Space Number.
Wait! There can be more info in an Estoppel Letter!
- Open HOA/Condo Association Violations.
- Possible Right of First Refusal.
- Additional Associations for the property.
- Association Litigation.
- Insurance Contact Information.
- Buyers Approval Required or Background Check.
- Attorney Contact Information for Delinquent accounts that have been turned over to collections.
This information is utilized to determine charges to buyer and seller at closing including HOA/Condo Association pro-rations for closing.
When is an Estoppel Letter ordered?
A Florida estoppel letter is part of the “behind the scenes” process that occurs after a buyer and seller are under contract.
The title company handling the closing will request the Florida estoppel letter from the Homeowners or Condo association or they may have a third-party company make the request.
Who supplies the Estoppel?
An authorized representative from the Community organization is required to complete and sign the form within 10 business days of request. If the Estoppel was done on a rush basis then it is required to be completed within 3 business days by the HOA/Condo Association and there is an additional fee charged for the rush.
If there are several years of unpaid fees as seen in Short Sales or Bank Foreclosures, then the Estoppel Letter request is made directly to the HOA/Condo attorneys office. In either case, if information is not delivered within 10 business days, the requesting party may file a lawsuit seeking compliance through the statute and the prevailing party is entitled to recover reasonable attorneys’ fees.
How much does a Florida Estoppel Letter cost?
Florida Statutes allow the HOA or condo association to charge a fee. Per statute this fee is capped at $250 per association, if no delinquent amount is owed to the association when it’s issued. Sometimes there is more than one association or in rare cases up to four associations. Who pays this fee depends on the terms in the real estate contract. The seller pays it in the FAR/BAR contracts, which is our standard resale contract.
Other fees allowed are an additional charge of $100 for a rush request and an additional $150 for delinquent fees. The property management company is allowed to charge up to $150 for administrative or transfer fees.
Problems with Florida Estoppels
The Estoppel Letter that is more than 30 days of issuance by email or 35 days if received by mail is no longer considered current.
Even though the Florida Statute dictates what is required on Estoppels, some of the associations do not provide the full required information.
There can be surprises, such as open HOA violations that were not disclosed by sellers.
If the Estoppel Information is expired, title companies are not requesting an updated Estoppel Letter. (Buyers Attorneys do request an update.)
We have run into title companies not even requesting an Estoppel Letter. Ultimately, this should always be done by the title company as HOA/Condo association can lien a property if the delinquent account remains unpaid.
The Home Buyer could be liable for the seller's costs…
Any past HOA balances accumulated during the seller’s ownership and documented in the Florida Estoppel letter, should be paid at closing from the sellers’ proceeds.
The buyer is not responsible for any sellers unpaid HOA/Condo balances, even if the estoppel is incorrect. However, if the buyer does not receive an estoppel and closes on the property anyway, they could be responsible for the whole amount owed or any HOA/Condo Violations.
**** Estoppel Mistakes True Stories****
Crazy Estoppel Story #1: Single Family Home. The Title company did not provide an estoppel letter. I questioned it and was told that this property was not in an HOA community. I persisted and was then told that it was an “optional membership”.
When I asked who then was maintaining the pool and clubhouse, the seller's agent claimed that there were a handful of “good samaritans" that paid all the expenses and since joining was a choice, the seller chose not to be a member.
I knew better than that, so I started digging for answers only to learn that the seller owned the property for 3 years and never paid a penny of his HomeOwners Association Fee. Yes, it was a loosely run HOA, however the seller's debt to them was over $10K.
I was called a “troublemaker” but the seller did have to pay that off so I was OK with that name. After all, a good Buyers Agent should know when to dig for answers…BTW the seller's agent, the seller and the title agent were all related.
Estoppel Story #2: A Million dollar condo. In checking the other units in the complex I noticed that the monthly maintenance fee on this unit was higher than the rest. Now that part is not so unusual as not all units in a complex are the same size so the cost could vary. The estoppel just showed that the seller was paying XXX amount of money each month for the maintenance fee.
However, my RE partner decided to call the HOA personnel and make friends. She learned that part of the higher monthly cost was for an assessment that was created the prior year for the building remodel and the extra payments were to continue for 2 more years. This assessment was not disclosed to the buyer and not mentioned on the seller's disclosure, (as the law requires).
The seller was so irate when this was brought up, that he tried to cancel the contract. (no, he couldn’t do that). This was a mistake of the Condo association who had just hired new management that did not understand the back story. The seller paid the entire assessment for the next 2 years and closed. The buyers were happy…
Buyers need to understand how important this is, because in the absence of a Florida estoppel letter, any past due amounts or HOA violations could be shifted to the buyer to be paid after closing. Keep in mind HOA/COA can lien a property and charge interest and late fees for unpaid debt.
What if the Home Sale does not Close?
The payor, most likely the title company, can be reimbursed the pre-paid Florida estoppel letter fee. They must submit a request along with documented proof closing did not occur within 30 of closing date. The HOA/Condo will reimburse the title company, but in turn can charge the cost to the seller.
Buyers Broker of Florida, Buyer Agents always shares behind the scenes information with our clients so you can become informed home buyers and don’t overpay.
If you are in the market to purchase a home, hire a Tampa Exclusive Buyers Agent so you can have someone who understands these nuances and cares enough to look out for your real estate interests. Call us at 727-202-9130.
Make Sure you get a Florida Estoppel Letter…
…or Risk Paying Fees!