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This is not true or at least a bit misleading.
Assessments for condos and HOAs are secured by both a personal obligation and by the property (in rem).
The security interest in the property for outstanding assessments does not go away simply because there is a new owner.
Suppose there is $2,500 in assessments owed by the seller at the time of transfer that was not addressed at closing and that the buyer now owns the property. The seller is still on the hook personally for the $2,500 - the buyer is not. However, the buyer's property is also still security for the $2,500. This means that the buyer's interest in the property can be foreclosed if the $2,500 is not paid. In order to prevent foreclosure, although the buyer is not personally liable for the $2,500 the buyer may have to pay $2,500 to prevent foreclosure of what is now the buyer's property.
Estoppel and resale certificates serve two purposes. The first is of course to generate windfall monies for the management company. After all since when do you have to pay a creditor to get a statement of an amount outstanding? The second purpose is to identify amounts allegedly owed and the extent this amount is secured by the property. In some states if the HOA/condo does not timely respond the HOA/condo waives its security interest in the property (by statute) as to the amounts allegedly owed by the seller.
In Texas the resale certificate statute for HOAs provides an estoppel to prevent the HOA from pursuing any claim that existed as of the date of the resale certificate that was not identified in the resale certificate. Know your state law. Generally it is a bad idea to allow or demand the "HOA" inspect the property because that simply generates money for the management company. The estoppel prohibits them from being able to pursue any claim that existed regardless of an inspection. So if nothing is listed then the management company cannot later start sending nastygrams for "violations" that existed at the time of preparation of the resale certificate which were not listed. No reason to pay them to create trouble for closing and life afterwards.
I'm referring to condos in Texas, and the management company does not get the money. And it's not a windfall. It's dues money that is owed to the association.
I am in NJ and on a condo board, and we have a couple of situations like this wherein the owners owe fees that they won't pay. I believe we can collect from the seller when and if they sell.
Usually the same owners who don't pay their fees also go bankrupt or lose their places to whoever holds their mortgage, and then, depending on the situation, we just have to write off our losses.
That happens to us too. If there is a foreclosure, the bank is going to get paid first. If there is any equity left we can collect it but if not the entirely is written off. The buyer never pays for it.
That happens to us too. If there is a foreclosure, the bank is going to get paid first. If there is any equity left we can collect it but if not the entirely is written off. The buyer never pays for it.
Again a localism. In NV the HOA gets up to nine month of HOA dues before the bank gets paid. And if the HOA forecloses it can wipe out the Bank's lien if the bank has not paid up the HOA dues after notification.
Typically, at closing the mortgage company or title officer or attorney will request that the HOA provide a letter certifying that there are no delinquencies. If there are any delinquencies, the seller pays them, often out of the proceeds of the closing.
This is why you should work with a Realtor. Though they are paid by the seller in most transactions, they are responsible to the buyer and it's their job to address these issues. In FL, for a condo sale, the buyer has 3 days to rescind their offer without penalty and has the right (in the contract) to examine HOA/COA docs (Seller is required to provide a copy to buyer) and a special disclosure form is required to be a part of the contract for purchse. An estoppel certificate is required before closing and certifies the position of the subject property (status of dues, and any HOA/COA violations or fines). It's the Realtors job to make sure the transaction proceeds accordingly and to check with the title company/attorney to make sure all these forms and certificates are provided timely to keep the transaction on track for the contracted closing date. If your Realtor is not doing this for you, find another one that will.
I do have a realtor, but I am also doing my own due diligence and want to be active in the process.
Again a localism. In NV the HOA gets up to nine month of HOA dues before the bank gets paid. And if the HOA forecloses it can wipe out the Bank's lien if the bank has not paid up the HOA dues after notification.
Confidentiality. Do you want just anyone calling and asking about your personal financial information?
You can call the source and ask. You aren't asking for a bank account balance from the buyer, but asking an HOA if the bills are current on a property being purchased. They don't have to give you amounts, but they can because that side of it is their business. If someone owes me money I am allowed to say so. Letting them know the property is changing hands gives this a chance to be addressed in escrow before it actually does change hands. The same goes for utilities. When you call to move them into your name they may let you know that the balances are unpaid. If they do this you should let your agent and the title company know.
Same with property taxes. If they are delinquent it shows up in the title report.
Over the last 20 years at least 90% of the homes built in Clark County NV are in HOA. And at the moment it is very close to 100%. Even custom home sites mostly come with CC&Rs which are restrictive and may well even have an HOA buried in them. Spend over half a million for a vacant lot in The Ridges and you get a full blown HOA with all sorts of rules about what you can build.
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