K.L. from Onslow County, North Carolina writes:
Dear Mister Condo,
Can I sue my HOA for lost money on a condo sale because they prematurely published an engineering report to owners detailing possible exterior wall work? The treasurer ballparked possible special assessment costs which were unconfirmed-material fact must be disclosed-however the work was not voted on, no spec. assmt. was ever confirmed, other remedies and costs are still being investigated 5 months post sale and so far, nothing further has happened. I lost full ask offers and took a $40k reduction to sell because this report got around the real estate community and was used by buyer’s agents to lower seller’s prices. Do I have any legal right to sue the HOA for the lost monies I had to forfeit because they stigmatized the property by prematurely disseminating a partial, incomplete and unconfirmed report that may very well change and never be implemented? I feel cheated out my full ask offers which disappeared as soon as potential buyers saw this report. The drama of this situation caused undue stress and costs for me. Thank you….
Mister Condo replies:
K.L., I am sorry for your predicament. As you may know, I am not an attorney and offer no legal advice in this column. If you wish to pursue a lawsuit, you should speak with a locally qualified attorney to determine if you have a case. In this litigious world in which we live, anyone can sue anyone else for whatever reason they choose. You are no exception and you certainly have the right to sue your association. However, I do not believe you will prevail because I don’t see where they did anything that might rise to liability that caused your buyer to back out of their purchase agreement. In the course of managing the association’s assets, a defect that needed to be remedied was found. It would appear that inadequate reserves had been collected to cover the proposed cost of repair and a Special Assessment might be needed. This is a common occurrence in condominium associations. I am not exactly sure how the information was entered into the Minutes of the association but you are right that a potential buyer has a right to know about any Special Assessments that are looming on the horizon. Failure to disclose such an assessment could cause a lawsuit from the new buyer against you and/or the association for failure to disclose. If you feel they violated your rights as a selling owner, you should speak with an attorney. All the best!
Here is some interesting commentary in the link, that has some similarity. What I get out of the article, is if the association put the pending assessment in the actual resale certificate before an assessment had been approved, without obtaining seller’s permission, that could be an issue. However, distributing materials about the work that would most likely need an assessment to owners, via minutes, handouts etc, and word gets out around town that work needs to be done at the complex that it could be an assessment, isn”t something you can fault the association, that the property value may have taken a hit. It happens often to people who are seeking to sell at a juncture of a looming assessment, many try to wait until the assessment and work is done before putting it on the market, especially as it can be marketing as having something new/repaired/etc., not everyone can. You would lose the money either way – having paid the assessment if you waited it out, or the assessment looming and people hear about it, or the assessment was approved and work not yet done.. I would inform a buyer of a possible pending assessment and not risk getting sued as the seller, that I did not let them know it is likely to happen, even if they don’t prevail, as lawyer fees add up fast. Also, many complexes are having projects stalled because of a shortage of materials, and may need to put off a project needing an assessment that can’t be scheduled in time to be completed before winter sets in, and building material costs keep going up so often it is hard to properly project costs when it will stabilize to have a proper assessment calculation. I would only use an experienced condo attorney who can give you straight talk if you want to get a consult to have a better idea, and could help you settle it in your mind.
https://www.linkedin.com/pulse/resale-certificates-buyer-beware-board-william-ward/