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Old 10-28-2014, 12:33 PM
 
15,630 posts, read 26,105,565 times
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Quote:
Originally Posted by MerriMAC View Post
A condo unit is up for sale. A few years ago, the condo board/homeowners voted to add a swimming pool and recreational area upgrades (shower area, hot tub, area for yoga). The board obtained a bank loan to pay for the health facilities, rather than spend reserves or bill an upfront special assessment to all owners.

Now the condo owners have two different monthly HOA payments that are combined into one payment. The first HOA amount is composed of the primary expenses (water, garbage, insurance, management expenses, etc). The second HOA is a small monthly payment for the bank loan. That second HOA will continue for five more years, at which time the loan will be paid off.

Is the condo unit seller obligated to payoff this special assessment before selling the unit to a new buyer? If there had been no board loan, then the seller would've been immediately responsible for his entire share of the special assessment.

The seller seems to want to benefit from the new recreation area as a selling point, and he doesn't have to pay for it all.

+ Should an offer contingency require the seller to credit the remaining loan balance to the new owner at escrow closing?
+ Should a lower offer amount be made to deduct the estimated loan balance?
+ Or should the potential buyer not factor the loan into the negotiations and just take over the remaining payments?
I would check with your state laws. As I understand it, in my state, if it is a "special assessment" the owner has to pay it out, and the whole share will come due at sale. It's the wording special assessment. If it isn't and is really an increase in dues...then no.

My expertise in this is coming from owning a janitorial company that deals with HOA's.
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Old 10-28-2014, 01:23 PM
 
419 posts, read 838,151 times
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Quote:
Originally Posted by jghorton View Post
You stated that the board decided to obtain a bank loan to pay for the health facilities, rather than spend reserves or bill a 'special assessment'. Then you ask if the unit seller is obligated to payoff this 'special assessment'. Which is it?
The board chose not to bill this special assessment to be paid immediately by current owners a couple years ago. They chose to obtain a bank loan to spread the payments (plus interest) over years.

Quote:
Originally Posted by cully View Post
I'm concerned, though, when you say the condo fee and special assessment are combined now. Perhaps you don't really mean that. Is it one check and somehow the manager directs part one way and part another? Or ...very important to an owner...will this one amount remain the same after the loan is paid off?
According to an owner I talked to in the building there are two charges listed on the monthly HOA bill:

The first charge is for the HOA (maintenance, management fees, insurance, etc).

The second charge is for the monthly payment for that special assessment. Each owner can fully payoff of their own balance of this special assessment, or each owner can choose to continue paying it monthly for the next five years.

There is an end to the special assessment payments for the loan in about five years. Even if some owners not pay (liens, etc), the special assessment for this bank loan will end. Other special assessments are always a possibility.
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Old 10-28-2014, 02:26 PM
 
Location: Salem, OR
15,487 posts, read 40,178,438 times
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I've had clients do it either way. We tally up the remaining special assessment and either ask the seller to pay it off in full prior to COE or deduct it from their offer price to compensate for the new owner taking over the payments.

The special assessment being broken down monthly was for the convenience of the homeowner at the time it was assessed two years ago.
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Old 10-28-2014, 04:29 PM
 
Location: Florida -
10,213 posts, read 14,737,263 times
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Quote:
Originally Posted by MerriMAC View Post
The board chose not to bill this special assessment to be paid immediately by current owners a couple years ago. They chose to obtain a bank loan to spread the payments (plus interest) over years.
Suppose the HOA had chosen to pay for the pool and rec. area out of Reserves that had been set-aside for a new roof or painting the building ... and then the HOA increased the HOA dues to recoup the reserves needed for the roof and painting? -- Would you still feel like the seller should continue to pay the HOA dues after selling the condo? It's not that complicated. If you don't want the benefit of a condo with a pool or Rec. area, or feel like you will be paying too much for those things, you should probably not buy the condo.

Similarly, Reserves are paid as part of HOA dues, to pay for future repairs (eg; elevator repair, roof replacement, paint). Therefore, shouldn't a seller expect a new buyer to compensate him for the amount he had paid toward a future roof replacement or pool resurface, that had not yet been done at the time he sold the unit? Of course not. A major issue for most condo buyers is, "Are the Reserves adequately funded?" -- If not, the buyer could encounter major costs in the near future for items they had not benefited from.
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Old 10-28-2014, 04:37 PM
 
Location: Florida -
10,213 posts, read 14,737,263 times
Reputation: 21845
Quote:
Originally Posted by MerriMAC View Post
The board chose not to bill this special assessment to be paid immediately by current owners a couple years ago. They chose to obtain a bank loan to spread the payments (plus interest) over years.

According to an owner I talked to in the building there are two charges listed on the monthly HOA bill:
The first charge is for the HOA (maintenance, management fees, insurance, etc).

The second charge is for the monthly payment for that special assessment. Each owner can fully payoff of their own balance of this special assessment, or each owner can choose to continue paying it monthly for the next five years.

There is an end to the special assessment payments for the loan in about five years. Even if some owners not pay (liens, etc), the special assessment for this bank loan will end. Other special assessments are always a possibility.
The key is whether this is a one-time 'special assessment' billed to current individual owners of record ... or an item that is simply paid-out of future HOA dues.

Suppose the HOA had chosen to pay for the pool and rec. area out of Reserves that had been set-aside for a new roof or painting the building ... and then the HOA increased the HOA dues to recoup the reserves needed for the roof and painting? -- Would you still feel like the seller should continue to pay the HOA dues after selling the condo? It's not that complicated. If you don't want the benefit of a condo with a pool or Rec. area, or feel like you will be paying too much for those things, you should probably not buy the condo.

Similarly, Reserves are paid as part of HOA dues, to pay for future repairs (eg; elevator repair, roof replacement, paint). Therefore, shouldn't a seller expect a new buyer to compensate him for the amount he had paid toward a future roof replacement or pool resurface, that had not yet been done at the time he sold the unit? Of course not. A major issue for most condo buyers is, "Are the Reserves adequately funded?" -- If not, the buyer could encounter major costs in the near future for items they had not benefited from.

HOWEVER, IF this is actually a one-time special assessment that each individual owner of record was liable for (and chose to pay over time, then it seems like it is the seller's debt and should be discharged accordingly.accordingly.
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Old 10-28-2014, 04:54 PM
 
3,734 posts, read 4,043,330 times
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Mr. Rational has it right. The seller is only responsible for any fees/expenses up until the date of closing. It doesn't matter who benefits from improvements, when you think the special assessment should have been paid, or what might have happened if there had been no bank loan.

Offer what you think is reasonable for the house, taking everything into consideration. I wouldn't mention the special assessment at the time of offer. If they think the offer is too low, you can always use the special assessment as an excuse to offer more, saying you didn't understand what your expenses would be regarding the HOA.
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Old 12-20-2016, 09:16 AM
 
1 posts, read 3,378 times
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luisprados84@gmail.com

My mother is selling a condominium and has paid two months of this assessment. The assessment monthly payment will end in 3 years. She is now paying her management plus the assessment of $59.00. Does she have to pay the total amount or will the buyer assume the payment. This is a maintenance assessment. Roof, paint and balcony wood work.

Thanks in advance
Luis luisprados84@gmail.com
Cell 786 600 5376
You can also text me. Thanks again
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Old 12-20-2016, 09:24 AM
 
Location: Florida -
10,213 posts, read 14,737,263 times
Reputation: 21845
People on this thread are only guessing about the arrangement set-up for this special assessment and future payments. The question is not what we think, but what the legal obligation actually is. You will need to ask the HOA for a copy of the written agreement - along with their understanding ... and then consult with your attorney if you do not like the answer, but still want the condo.

Of course, since this thread is almost two months old, the matter has probably already been settled. If you happen to get back to this thread, please let us know how this worked-out.
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Old 12-20-2016, 10:25 AM
 
5,048 posts, read 9,545,559 times
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Notime, probably the answers are pretty similar to the forgoing answers. If you are in Florida, looks like either can be done.

For one thing, read your sale contract that would be signed by both sides. There are sections regarding Fees for the Seller and Buyer; also a section on Disclosures. I have read two for FL I have on hand. The contract will give two options to check. One, that the seller is paying TILL settlement and the buyer pays after. The other that the seller is PAYING in full before or at settlement.

Important: If a person overlooks checking either box...the first stands...that the seller pays till settlement.

Of course, that is also checked before closing by the title company or whoever does the closing. They check with the HOA with another signed form.
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Old 12-21-2016, 07:43 AM
 
Location: Bloomington, MN
103 posts, read 97,431 times
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I've run into this a couple of times and it just becomes part of the overall negotiation. The seller wants to get the most cash they can and the buyer wants a good deal.
If it's a desirable condo, in a sellers market, than the seller will prevail. If the condo has been on the market for 100 days with 5 price reductions the buyer will prevail.
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