The Estoppel Fee Monopoly

Over the last few years Associations (Condominium and Homeowners) have substantially increased the fees they charge to prepare estoppel letters. Unfortunately, this has caused further undue hardship on sellers, buyers, title agents, realtors, etc., during tough economic times. There are many sellers, buyers, realtors, title agencies, etc., that believe the unsubstantiated and exorbitant fees are a means to take advantage of the fact that estoppel letters are needed to close transactions within an Association. At the legislative level there is a push to correct this inequity and to regulate how (and how much) an Association and its counsel can charge for estoppel letters. To that end, there has been legislation drafted that would regulate the collection of estoppel fees. This legislation, which is still in the draft phase and has yet to be presented, provides the following three tiers and associated fee structures:

TIER ONE:

Description: Owners who are current in their Association fees

Anticipated Fee Structure: Unable to charge for the preparation of an estoppel letter

TIER TWO:

Description: Owners who are delinquent in their Association fees

Anticipated Fee Structure: Attorneys (and would presume Associations as well) are able to charge a “reasonable” fee for the preparation of an estoppel letter.

TIER THREE:

Description: Bulk Purchases

Anticipated Fee Structure: Fees will be based on the number of units being sold taking into consideration monetary obligations for each Unit.

It is anticipated the estoppel fee legislation will receive attention during the 2014 legislative session. We do anticipate some tweaks to the fee structure (possibly a set flat fee for Tier One) but ultimately believe this legislation is an important step in regulating those Associations that felt it necessary to charge such excessive fees.

As always, if you have any questions in regards to the foregoing, we urge you to consult with your real estate attorney.

Sincerely,

Berlin-Patten, 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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