What You and Your Buyer(s) Need to Know About the Condominium and Homeowner’s Association Approval Process.
Afraid of rejection? Who isn’t? Applying to a condominium association or homeowner’s association shouldn’t be as scary as asking someone out on a first date. However, it is common that your buyer will need to be approved by a condominium association or homeowner’s association which will include submitting a written application and possibly a face-to-face interview. This begs the following questions:
1. How do you know if your buyer is purchasing a property subject to a condominium or homeowner’s association?
The answer to question no. 1. is obvious if your client is purchasing a condominium unit (hint, if your client is purchasing a condominium unit there is going to be at least one condominium association).
However, the answer can be less obvious when your client is purchasing a single-family residence. The seller is often the best resource to answer question no. 1. Why?
If the property is subject to an association, the seller has likely been paying regular assessments to the association and has received notices from them.
2. How do you know whether the association has the right to approve or deny your buyer?
The Governing Documents will determine whether the association has the right to approve your buyer, i.e. the Declaration of Condominium or the Covenants, Conditions, and Restrictions, Articles of Organization and Bylaws (collectively, the “Governing Documents”).
However, associations vary widely in many respects and the Governing Documents may not always clearly delineate the association’s approval guidelines.
This brings us to the next set of questions:
3. Under what circumstances can an association deny a prospective purchaser?
Approving the buyer will violate the association’s Governing Documents. An association cannot approve a buyer if approving the buyer would violate the association’s Governing Documents. For instance, the association cannot approve a buyer who plans to move in with three dogs and six cats if the Governing Documents limit pet ownership to one dog or one cat. Exceptions may apply for medically approved service animals.
The buyer has been convicted of a felony and the buyer’s civil rights have not been restored or the buyer has been convicted of a property-related crime. Remember, the Board owes a fiduciary duty to protect the health safety, and wellness of its members.
The buyer is not deemed to be credit-worthy or financially responsible. The association has the authority to deny applicants they deem likely to default on their maintenance fees. Why? When a buyer stops paying their monthly maintenance fees, the burden is often felt by all of the other owners within the community through increased assessments and/or reduced maintenance and upkeep.
Misrepresentations or false statements made during the application process. The association has broad authority to deny any prospective buyer who has provided false information or who failed to provide information requested on the application or during the interview. While there are numerous examples of information a buyer may misrepresent or fail to provide, it is safe to say, “if you buyer lies the association may deny.”
a. Are there any limitations on the association’s authority to deny a prospective purchaser?
First, the association acts by and through its Board of Directors (“the Board”). The Board owes a fiduciary duty to the members of the association. The Board must act reasonably in carrying out their duty to protect the health, safety, and welfare of its members.
Second, associations are limited by what is permitted under the association’s Governing Documents and state and federal fair housing laws. Under the Fair Housing Act (“FHA”) a Board cannot deny a buyer on the basis of race, color, national origin, religion, sex, familial status, and disability.
4. What can the buyer do if they are denied by the Board?
If your buyer believes they were discriminated against during the approval process and denied on the basis of race, color, national origin, religion, sex, familial status, and disability, then your buyer should consider consulting with a litigation attorney to discuss their options.
PRO-TIP:
Encourage your client to complete the association’s application as soon as possible and to request the first available interview date. This way if your client is denied there may still be time for your client to cancel the Contract and get their deposit back. Don’t forget to request a complete set of copies of the Governing Documents.
Remember, no one wants to feel the sting of rejection.
Please Contact your trusted local real estate attorney if you have any questions about a Condominium or Homeowner’s Association’s approval process.
Sincerely,
Christophal C.K. Hellewell, Esq. chellewell@berlinpatten.com
Berlin Patten Ebling, PLLC
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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