Why does an estoppel certificate matter? Because it ensures buyers and sellers have accurate information about any associations that impact the property.
What is an estoppel certificate?
Formally, an estoppel certificate (or estoppel letter) is a legal document that outlines any financial obligations, such as (unpaid dues, upcoming changes to dues, special assessments, or fines), as well as other important information like buyer approval requirements and status, any violations of rules and regulations tied to the property, and the status of any applicable litigation.
The estoppel is typically ordered by the closing agent, and the costs associated with it are typically a seller’s expense.
What will this cost the seller?
Florida has a statutory fee cap for estoppel certificates, and associations are allowed to charge a maximum of $299 per estoppel certificate if the account is current and there are no delinquencies. Multiple fees may apply, if there are multiple associations that impact the property.
However, the law allows for additional charges when the estoppel is requested as a rush (if the association provides that option) or if the owner is delinquent in any payments to the association at the time the request is made. These additional fees can run anywhere from $100.00 to $200.00.
When must an estoppel certificate be delivered?
Once the request is made in writing (often via email or through the management company’s website), the association must deliver the estoppel certificate within 10 business days.
Failure to meet this deadline means allow the requesting party to pursue remedies to enforce delivery and can also result in waiver of the association’s right to charge their estoppel fee.
When is the fee due?
Associations, through their management companies, have the ability to either allow the closing agent to collect the fees at closing or, alternatively, require payment from the seller upfront before they process the estoppel.
Understanding the association’s requirements and ensuring a seller is prepared to make this payment can avoid expensive surprises during the closing process.
Are estoppel fees refundable?
Yes, if a sale does not close and the certificate was requested by or on behalf of the seller, Florida law requires the fee to be refunded. Typically the association will ask for a copy of the termination of the contract or other proof the contract was cancelled.
While sellers are often hesitant to pay for estoppels upfront, fearing the risk of the contract being cancelled, the assurance that their money will be refunded should the contract be cancelled allows them to move forward with placing the order, therefore avoiding delays in closing.
Estoppels are an important piece of the closing puzzle and ensuring you and your clients understand their requirements and obligations under the contract and to the association will ensure a smooth closing for all parties. As always, if you have any questions about estoppels or the closing process, please consult with a qualified local real estate attorney.
