Category Archives: Selling

HOA Seeking Additional Assessment from Former Owner

P.J. from outside of Connecticut writes:

Dear Mister Condo,

Can an HOA increase assessment amount 8 months after I sold condo and deed changed hands? The management co. made an error in what they call the “estimate” of their closing figures which were baked into the sale amount (buyer paid the assessment and price was lowered accordingly). Now they say I (previous owner) have to pay more even though the sale cleared title and resale cert was all normal. The letter tells me I owe more than what they thought I owed when they gave the figures at closing time.

Mister Condo replies:

P.J., this is clearly a legal question for a qualified attorney in your state. Different states handle these transactions differently so I cannot give you a definitive answer for your scenario. I will offer this advice. Once the sale is made and the closing is over and the title has changed hands, the seller is typically relieved of any further claims against the unit. In other words, if the HOA makes a Special Assessment after your name is off the title, that assessment is on the new unit owner. There are exceptions though and you really need to speak with an attorney from your state who can give you a proper legal answer for your situation. The way you have described it sounds fishy to me but I am not an attorney and cannot offer you any legal opinion here. I know I would be reviewing the details with a qualified attorney to make sure I was being dealt with fairly and within the scopes of local law. All the best!

Condo Price Rebound After Settled Lawsuit

J.B. from outside of Connecticut writes:

Dear Mister Condo,

Our condo dropped significantly in value just like every other condo community around us when the economy collapsed in 2008. In the meantime, our HOA began a litigation against the builder. This meant that when prices of other communities began to rebound a few years ago, ours remained low because mortgages were generally unavailable to purchasers and it has been all cash sales. All other condo communities surrounding us have now rebounded to pre-recession value, but our community has remained low in price due to the litigation. We just received notice that all parties have settled and the court ruling will be within the next couple weeks. We would like to sell our condo and are wondering how long it will take to see our condo value rebound now that the litigation has ended. Can we start using other similar communities as real estate “comps”? Thank you!

Mister Condo replies:

J.B., I am sorry your condo association was forced into litigation against a developer. Lawsuits can have long-lasting repercussions against associations including the financial burden of funding the suit when monies could be used elsewhere or put in Reserve, creating a strong financial position for the condo, which is desirable to an educated purchaser. That being said, if your condos look as nice as others in your market, there is no reason to think the units shouldn’t rebound now that mortgages are available. Price is driven by market demand. An encumbrance like a lawsuit can hinder demand but with the suit out of the way, I can’t think of any reason the prices shouldn’t rebound quickly. Make sure the unit is in good shape and that the association is doing all it can to keep the curb appeal in good order. The right realtor will market the unit properly and the market will dictate the price. Good luck!

Amended Condo Deed Trumps Board’s Forgetfulness

K.F. from New Jersey writes:

Dear Mister Condo,

I’m a New Jersey Real Estate salesperson representing a seller of a Penthouse unit in a 5 story walk up in a 6-unit Condo. When my client purchased her unit in 2009 she was also given an amended deed that included the exclusive right to build an approved deck on the roof. The board met last week and in their Minutes decided to retain the roof rights (now that my client wants to sell). They don’t seem to be aware/remember that the roof rights were gifted and deeded and has been filed with the city/county. What rights do they have to take back roof rights if any at all?

Mister Condo replies:

K.F., Boards have no more rights than you or I when it comes to taking back anything that has been filed on a deed. In fact, this is a classic example of where an attorney can likely solve this for you with a few letters or phone calls showing the deed. The Board’s “memory” of the event is irrelevant, regardless of what they have put in their Minutes. If they take action against your client, the attorney will simply counter with the Deed. One caveat: is there any stipulation on the deed that would indicate that the approved deck had to be installed by a certain date? If that date has come and gone then your client is out of luck. Other than that, this sounds like a fairly simple case to me but I am not an attorney. Have your client speak with an attorney who specializes in real estate, get a legal opinion, and good luck selling this Penthouse condo unit. It sounds gorgeous!

Condo Sale Hampered by Board President

J.R. from outside of Connecticut writes:

Dear Mister Condo,

I recently entered a contract to sell my condo. After a week of being under contract, the president of the board has mentioned something about blocking my sale due to my partially finished basement. The basement was finished much like others in my building, but I don’t have a second form of egress. I spoke to the town building inspector about this when I did the work and he mentioned that as long as I did not deem this livable space, or make it a bedroom, or damage the structural integrity of the building, it was not an issue. The president mentioned to my real estate agent that I may be forced to tear it out. Can the association legally block a sale due to this or make me demo the work I did?

Mister Condo replies:

J.R., it doesn’t sound to me that the Board has actually blocked the sale as much as cast a doubt as to whether or not the sale should proceed by giving the realtor a heads up about a potential problem. What the realtor does with that information is out of the control of the Board. You mentioned speaking to a town Building Inspector at the time you made the installation. I don’t suppose you got something in writing from him, did you? That would make this “problem” magically go away. Without a certificate of some sort, it would appear there is a grey area surrounding your basement make over. If a different building inspector came out and inspected your property, what would the outcome be? Can you be certain that the lack of egress wouldn’t halt a sale? I agree with you that the Board may be overstepping by alerting the realtor to the potential problem. However, once the sale is complete and you are out of the picture, the new homeowner may have a problem. Problems for owners often become problems for the Board. I don’t agree with the tactic but I understand the sentiment. You may be able to solve this issue by asking the Building Inspector to come to your unit now and issue a letter that states that your basement makeover is, in fact, acceptable as is. That will give you and your realtor the confidence to sell your unit knowing the new owner (and the Board) will not have a problem. Good luck!

Condo “Marketing Fee” Forces Unit Owners to Use Condo’s Designated Realtor

S.Y. from outside of Connecticut writes:

Dear Mister Condo,

Our condo board discriminates against unit owners who want to list their unit for sale outside the condo realtor. If you list with the condo’s realtor, the realtors commission of 6% is paid from the condo’s 10% “marketing fee” levied when a unit sells. If you use your own realtor, you pay the 10% condo “marketing fee” plus 6% to the realtor.

Many of us want to use our own realtors because the condo’s realtor shows preference to Board members and their friends. If you’ve ever been in a disagreement with the Board, look out, your unit will never sell.

We have considered legal action but this will damage sales prospects for our units.

 

Mister Condo replies:

S.Y., damaged sales prospects aside, I don’t see any other way to remove this obstacle to using a realtor other than the “selected” condo realtor. That being said, I am not sure there is a true legal issue here. The 10% “marketing fee” is a condition for anyone who sells. While I think that 10% is an exorbitant amount to pay for “marketing fees”, from what you have told me it is a rule that has always been in place. Perhaps the Declarant wanted to monopolize all initial sales and resales so the clause was added? Whatever the reason, the 10% is currently the law of the land for your association. How do you and your fellow unit owners feel about this? If there is enough dissent, why not simply vote to have the rule removed? The fee paid by a seller to a realtor is typically negotiated by the seller. Here, the association has already negotiated a permanent seller’s fee of 6% to the realtor, which the association is essentially rebating back to the seller because it is coming out of a 10% “marketing fee” the seller agreed to abide by when he or she originally purchased in to your association. While I will agree that it is a bit questionable, I am not certain it is anything that can be undone by bringing a suit against the association. You have the power to correct the situation by simply eliminating the “marketing fee” or making it 4% (10% – 6%). Either method would leave the unit owner free to select their own selling agent at whatever fee they negotiated. 6% is common but I know of many markets across the country where listing fees are far less. Many times, the real estate market dictates what is a reasonable fee versus a “set in stone” flat rate. Good luck!

Condo Lawsuit Revelation Shouldn’t Cause Issue for Selling Owner

J.P. from New York writes:

Dear Mister Condo,

I am planning to sell my condo soon. One of my fellow owners is deeply behind on HOA fees. There’s a law suit pending. I’m told this could hold up my selling. I’m in Brooklyn. Any help would be greatly appreciated!

Mister Condo replies:

J.P., I am sorry that your association is dealing with a delinquent unit owner. While lawsuits against the association might cause a potential buyer for your unit to shy away from the deal, a lawsuit initiated by the association against a delinquent unit owner should not. The association’s only risk here is that the unit owner doesn’t pay in timely fashion. The association’s risk is relatively low, seeing as they have a lien against the unit owner in arrears. It is a requirement that lawsuits that the association is involved in must be disclosed to a potential buyer, I don’t see where this suit should make them change their mind about purchasing your unit. This type of lawsuit is quite common and almost always won by the association. Good luck!

Timing of Special Assessment Hampers Condo Unit Sale

W.L. from outside of Connecticut writes:

Dear Mister Condo,

My condo is under contract and set to close very soon. I just received a notice about a week ago of a meeting of the owners to approve/disapprove an assessment of $750,000 ($7,500/unit). I immediately notified the buyer’s agent and invited the buyer to attend the meeting. The assessment was approved last night (the buyer was out of town… supposedly). Is the buyer obligated to close? Note: I am willing to finance the $7,500 amortized over 3 years. Note 2: Closing attorney says buyer is obligated to close because he will ‘enjoy’ all the benefits of the expenditure.

Mister Condo replies:

W.L., congratulations on selling your unit. Special Assessments are ugly for so many reasons. The timing of this one as you are selling your unit is almost calamitous. The liability for the assessment is with the unit owner of record when the assessment was levied. So, depending on when the closing date and time and transfer of deed for your unit occurred, the assessment is on the unit owner of record at that time. The purchase and sale agreement you have with the new owner is a separate entity and your attorney can best advise you on what legal options you have if the buyer breaks that agreement, for whatever reason. So, in the simplest of terms, look at the date and time the assessment was levied. Look at who owned the unit at the date and time of the assessment. That is who owns the assessment. As for offering to finance the assessment for the new buyer, that is a decision you need to make. Personally, I would not offer that option as it isn’t your problem, but very well could be if the unit owner defaults on the repayment. Then you will need your attorney for a whole other reason. Good luck!

Forcing a Unit Owner to Sell to Make Association Fannie Mae Compliant

M.B. from Southern California writes:

Dear Mister Condo,

There are 51 units in my building in Southern California. I am aware of a Fannie Mae Guideline that states that no one owner can own more than 10% of the units. In my building, there is an owner who owns 13 units which is 25%+. Because of this, several sales (5 in the last 3 months) have fallen out because the buyers cannot get financing. Question is: is there a legal way for the HOA to sue that unit owner to get him to sell his units until he owns only 5 since he is preventing the sales of any units in the building which, in turn, is also preventing the prices of our units from going up (depressing the building)? Do the other unit owners have any recourse?

Mister Condo replies:

M.B., as you know, I am not an attorney nor am I an expert is California state law so please accept my advice as friendly and not legal. For a legal opinion, you need to consult with a local attorney who is verse in your state’s laws regarding HOA and condo association law. My first blush answer to you is that this owner has not done anything wrong. Unless your by-laws state that no one person may own more than 10% of the units, you likely don’t have a leg to stand on. The unit owner didn’t cause Fannie Mae to set its guidelines. In fact, Fannie Mae could change its rules tomorrow to 5% and then other owners would be effected. Unless you could prove that this unit owner was maliciously trying to prevent sales of other units within the HOA, I don’t think there is too much you can do. Non Fannie Mae mortgages do exist. They aren’t as easy to find and they don’t always have as favorable a rate but that really isn’t the concern of the unit owner who simply purchased units as he saw fit. I am sorry I don’t have more positive advice for you but I don’t think there is too much to be done here. Good luck!

Condo Owner Wants to Change Address of Unit

R.D. from outside of Connecticut writes:

Dear Mister Condo,

We are in a 3-condo complex and 1 unit of the 3 wants to change address because he is on the side of the building and the other 2 units are in the front the reason he wants to change address is it is confusing to all. He wants to change it so it says the side street he is on now. He is a good owner but he is selling his unit. Where does it leave the other 2 units legally?

Mister Condo replies:

R.D., I’ve been answering HOA and condo unit owner questions for quite a few years now. I have to say, I thought I’d heard it all but your question threw me for a bit. If I understand correctly, the unit owner who is selling his unit wants to change his address. Legally, the property has an address from the municipality where the condo resides. I do not believe the condo association can legally change the address of any of the units as they are real estate and the deeds are on file at City Hall or your local records division where such records are kept. You could check with a local attorney who specializes in real estate or ask the records keeper if such a change is even possible but I think it unlikely. Since he is selling his unit, this issue is going away as soon as he does. I wish him, and you, a speedy sale. Good luck!

Is a Condo the Perfect Gift? Maybe Not…

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E.E. from Fairfield County writes:

Dear Mister Condo,

Do I have to apply like a buyer to the HOA if a condo was gifted to me but I just plan to sell?

Mister Condo replies:

E.E., congratulations on being gifted a condominium unit! I am going to have to rethink my Christmas list this year as all I have asked for are new socks!

On a more serious note, it really depends on the rules of the association with regards to transfer of ownership. The previous owner, in theory, went through an approval process with the association as prescribed in the association’s by-laws and as a term of purchase within the association. The documents do not likely address a condo unit being gifted because it such an unusual occurrence. My guess is that you would have to submit to the new owner application although I don’t think there is too much the association can do to prevent you from taking legal ownership of the unit. If your plan is to sell, I would get it listed as soon as possible so that you can additionally demonstrate to the Board that you have no intention of living there. However, if you decide to rent the unit out, you would still have to follow the association’s rules for doing so and, it could then be argued that you are, in fact, taking ownership for more than a transient period of time and may be subject to the application (and acceptance) of the association as outlined in its governance documents. While you may be able to tread through this transaction without counsel, I sincerely recommend that you consult with an attorney. You will likely need one to assist with the eventual sale of the unit anyway, so it might be easier to involve the attorney from the beginning of the process to avoid any potential legal hassles you might encounter. All the best!