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What Is An Estoppel?!

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From the very beginning of any residential real estate transaction, Buyers and Sellers are faced with many different decisions, obligations, and the juggling of various other moving parts; from deciding what terms of the contract will be acceptable, to obtaining financing, and everything else that goes into preparing for the big day — closing day! Some items that tend to go overlooked at times are all the requirements and fees associated with closing on a property that is located in a Condominium or Homeowner’s Association (“Association(s)”). When closing on a property in an Association, it is very important to be aware of additional requirements related to the Association which must be met prior to closing; including, but not limited to: collection of past due and sometimes future assessments, resolution of Association violations, board approval of new buyers, etc. So how exactly do we know what Association requirements need to be resolved prior to closing, and who pays for the fees related to clearing up these items? Glad you asked!

· Estoppel Certificates: An Estoppel Certificate (“Estoppel”) is a document that must be provided by an Association within 10 days of receipt of a written request. The Estoppel is requested by the Closing Agent and generally discloses, among other things, the dues that are owed, special assessments, whether or not the buyers are approved for purchasing the residence, and any fees owed by the parties for preparation of the estoppel certificate and related fees. The Estoppel may also make other important disclosures such as any pending litigation by or against the Association, the existence of other “sub” or “master” Associations, and the possibility of future special assessments.
· Association Fees: So who is responsible to pay all of the fees disclosed by the Estoppel? Section 18(K) of both the Standard and AS IS FAR/BAR Residential Contracts (the “Contract”) states that Association fees will be made current and prorated as of the day prior to the Closing Date. If any Association fees are past due, they will need to be paid by the Seller prior to closing. In addition to any recurring Association dues, the Contract also provides instruction as to which party is responsible for fees due for preparation of the Estoppel and related fees. Section 9(a) of the Contract provides that Sellers are responsible for Association estoppel preparation fees, which can be up to a maximum of $250 or more if the order needs to be rushed. Section 9(b) provides that Buyers are responsible for any Association “application/transfer fees”.
· Association Disclosures: By examining Estoppels, Closing Agents are able to determine what is owed to the Association and by who, but how do Buyers, Sellers, and Realtors access this information prior to entering into a contract? All Buyers should carefully review Association disclosures prepared by Sellers, and if the Sellers did not prepare one Buyers should insist they do so before executing the Contract. Association disclosures will provide much of the same information provided in an Estoppel, including what the recurring assessments amount to. For any additional information, Buyers can and should review the Association documents which provide for all of the rules and procedures which govern the association. If the property is in a Condominium Association, certain governing documents must be provided to the Buyer by the Seller, and the Buyer has three days to review said documents and cancel the Contract if anything contained in the documents is unacceptable.

By reviewing and understanding the documents mentioned above, all parties to a Contract can avoid any surprises or closing delays due to unknown Association fees or requirements. Should you have any questions regarding Association fees, estoppel certificates, or any other related topic, please don’t hesitate to reach out to your trusted local real estate attorney.

Sincerely,
Andrew J Conaboy, Esq. aconaboy@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.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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