Some CA home sellers don’t understand their disclosure obligation to provide copies of homeowner association (HOA) documents to buyers.
This lack of understanding by sellers can sometimes lead to seller disclosure challenges before buyers clear contingencies and complete the purchase.
When we serve as REALTORS® for home sellers, we make sure that these HOA disclosures/documents are provided to the buyers:
1. Declaration of Restrictions (known as the “CC&Rs”).
2. Articles of Incorporation – or Articles of Association
4. Any other document which establishes or defines the common, mutual, and reciprocal rights and responsibilities of the owners or lessees.
5. Current Financial Information and related statements (if available or applicable), such as: An Operating Budget, Financial Documents, Association Statements, Summary Reserve Funding Plans to include the following information:
- Estimated revenue and expenses on an accrual basis,
- Association reserves (based on assets held in cash or cash equivalents),
- Estimated remaining life of major components,
- Estimated useful life of major components,
- Estimated replacement cost of each major component,
- Estimated reserves necessary to repair, replace, restore, or maintain major components,
- Actual reserves set aside to repair, replace, restore, or maintain major components,
- Amount of funds, if applicable, received from a compensatory damage award or settlement arising out of any construction or design defects,
- Percentage ratio of actual to estimated reserves,
- Current deficiency in reserve funding expressed on a per unit basis,
- Statement of anticipated assessments to repair, replace, restore, or maintain major components,
- Whether the board of directors has determined to defer or not undertake repairs or replacement of any major component with remaining life of 30 years or less,
- Whether the association has any outstanding loans with an original term of more than one year(including the terms),
- Statement of procedures used to calculate reserves for future purposes,
- Statement regarding assessments and foreclosure (given within 60-day period prior to beginning of fiscal year). Statutory form for the “Assessment and Reserve Funding Disclosure Summary” can be found in California Civil Code Section 1365.2.5.
6. Regular, Special Assessments and Fees.
7. Outstanding Delinquent Assessments, Monetary Fines or Penalties – Include any late charges, interest and costs of collection.
8. A statement describing the association’s policies and practices in enforcing lien rights or other legal remedies for default in payment of its assessments.
9. Summary of the association’s property, general liability, earthquake, flood, and fidelity insurance policies.
10. If there is a provision in the governing documents that prohibits the rental or leasing of any separate interests in the common interest development to a renter, lessee, or a tenant, a statement describing the prohibition and its applicability.
And upon request by the prospective buyers, they must also be provided with:
A. Copy of HOA minutes of the meetings, excluding meetings held in executive session, of the association’s board of directors, conducted over the previous 12 months, that were approved by the association’s board of directors.
B. HOA cover sheet itemizing: (1) the HOA sales disclosures required by law; (2) the HOA disclosures provided by the HOA; and (3) the estimated fee for providing the required HOA disclosures distinguished from other fees, fines, or assessments.
When we serve as REALTORS® for home buyers, we make sure that the HOA disclosures/documents are provided to our clients.
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