What is an HOA Estoppel
Homeowners Associations (HOAs) are increasingly popular among homebuyers in the United States. These communities offer residents access to various amenities such as swimming pools, fitness centers, and gated security. HOAs also have strict rules and regulations that homeowners must adhere to, and failure to comply can result in fines or legal action.
If you're buying or selling a home in an HOA, you may have heard the term "HOA estoppel" come up. An HOA estoppel is a crucial document that provides vital information about the property's status and the homeowner's financial obligations. In this article, we'll take a closer look at what an HOA estoppel is, why it's essential, and how it affects you as a homeowner.
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What is an HOA Estoppel and what does it include? |
An HOA Estoppel is used to provide all fees that must be collected upon the successful closing of a resale property. The Estoppel is often also referred to as a demand statement, certificate of assessment, a resale statement or a closing statement and the name of the document will vary by state. The fees included in this document would include any delinquent amounts due from the seller, any amounts that may be payable to an attorney handling a collection matter on the subject property, working capital fees, transfer fees, reserve fund fees, community enhancement fees and/or fines that may be due on the account for compliance issues. Any fees due the managing agent will also be included in this document and most fees are not payable unless the escrow closes.
This document will also include if the association has passed a special assessment that is due at the time of closing or will be due after closing so that the buyer is aware of the future special assessment. A brief description of what the assessment will be used for is also included. It may also include if there are any known compliance issues as it relates to the lot or the unit so the buyer is aware of items that may need to be corrected or are found to not comply with the governing documents of the association.
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The Purpose of HOA Estoppel
The purpose of an HOA estoppel is to protect the buyer and seller in a real estate transaction. The document ensures that the buyer knows the precise amount they will need to pay in HOA fees and any other outstanding debts before closing on the property. It also protects the seller from being held responsible for any outstanding fees or fines after they have sold the property.
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What does it cost? |
The cost for preparing this statement will vary from state to state as some states have a cap on the amount that can be charged for the document as governed by state statute or individual HOA Acts. Typically, the fee for preparing the statement is payable to the managing agent which is driven by the management agreement negotiated with the association.
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Who orders an Estoppel? |
The “Estoppel” request is usually ordered by the title company or the closing attorney depending on the state. In rare cases, it can also be ordered by the seller who will then provide to title or the closing attorney. It is recommended that the request be completed by the title company or the closing attorney professionals since they will be handling the closing documents. If the community is managed by AAM and there are specific questions surrounding the preparation of this document or how to order the documents, please email the AAM’s Disclosures team at disclosures@AssociatedAsset.com.
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In Summary
An HOA estoppel is a crucial document for both buyers and sellers in a real estate transaction. As a buyer, you want to know the exact amount you'll need to pay in HOA fees and any other outstanding debts before closing on the property. As a seller, an HOA estoppel protects you from being held responsible for any outstanding fees or fines after you've sold the property.