When your client is purchasing a property located within a homeowners’ or condominium association, there is more to consider than just the condition, location, and price of the residence. The respective association often overlooks the crucial aspect of the approval process. Understanding the approval process, the protections found within the FAR/BAR HOA Disclosure and Condominium Rider, and relevant law, are essential for a smooth real estate transaction.
The HOA Disclosure and Condominium Rider
When buying a property within an HOA or Condominium Association, you must use the applicable rider or disclosure. These documents contain vital disclosures and information such as the amounts of regular assessments and any potential special assessments. It is important to note that both documents contain provisions for any applicable approval process and, with them, additional contingencies. Specifically, both documents dictate when to start the approval process and when to receive approval. In the event the buyer does not receive association approval within the allotted time, the buyer may terminate the agreement and receive a refund of their Earnest Money Deposit. However, it is important to note the buyer must deal in good faith and timely comply with submitting necessary information to the association.
Understanding the HOA and Condominium Association Approval Process
Depending on the association, buyers may need to obtain approval before closing. We strongly encourage potential buyers to review the governing documents, rules, and regulations of the applicable associations to understand the approval process and their requirements. Buyers should be ready to provide personal information such as birthdates and social security numbers to effectuate any required background checks. Timeliness is also of utmost importance. In some instances, buyers will inadvertently fail to provide the requisite information in a timely manner, which can result in additional fees charged to the buyer and may delay the transaction’s closing.
Florida statutes provide associations significant power to both approve and deny new buyers as well as renters so long as it is in accordance with the association’s governing documents. Based upon its’ authority in the governing documents, Associations may dive deep into a prospective buyer’s financial past to look for any bankruptcies and foreclosures and may look into an applicant’s criminal record. The association’s authority to deny an application is based upon the language of the association’s governing documents. While associations can approve or deny potential applicants based on their governing documents, they must always comply with the Fair Housing Act. This means an association cannot deny individuals based on age, sex, religion, race, disability, nationality, and familial status. However, it is important to note that under the Housing for Older Persons Act (HOPA), fifty-five and over (55+) communities have an exemption regarding familial status. This exemption permits (55+) communities to exist so long as the association is properly qualified in accordance with HOPA.
In certain instances, an association may have expanded denial authority contained in its governing documents. Such authority may provide the association with the right to deny an applicant based upon a defined “for cause” reason. An example of “for cause” reasons are as follows:
- The applicant knowingly misrepresented facts on the application.
- The applicant is a convicted felon whose civil rights have not been restored.
- The applicant has a history of community violations.
- The community’s rules contained within the governing documents support the reason for the ultimate denial.
Assisting your clients going through an association approval process is a necessity for a smooth closing. It is imperative that buyers and agents alike familiarize themselves with the approval process and act timely with respect to obtaining the requisite approval. Should you have any questions with regards to Homeowners’ or Condominium Association approvals, please do not hesitate to reach out to your local trusted real estate attorney.
UPDATE: This blog was edited on 11/9/2023 to revise information in the Relevant Law section.