What documents am I entitled to?

Started by MelissaP1 • 62 replies • 13139 views

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MelissaP1 (Alabama)
Posts: 13,836

Posted:

We seem to get this issue a lot on here. Some posters even suing their HOA because of no provided documents. It's time to clear up what is your "right" and what is "courtesy". Considering many people don't know they have joined a HOA or they don't receive copies of the proper paperwork. Plus who is responsible for supplying this information and should you pay for it?

The law in most states is that it is the BUYER's responsibility to be INFORMED. How that is done exactly varies but in the end the law views it as the buyer's responsibility/fault. In general, your Realtor, loan officer, closing lawyer, Title company, home inspector, house insurer, HOA, and even the seller are NOT responsible for providing you the documents. CAVEAT: There are a handful of states that do require the SELLER to hand over the rules to the potential buyer. That is something you should ask your realtor or do some research on to see if that is required in your state. Can you sue if they don't? That will be up to you if the seller did not provide as required. The suit would be against the seller ONLY.

The documents you can view at any time are those considered "PUBLIC". Those documents are at your local courthouse in the records department. They also may be online in some states. Those documents considered "PUBLIC" are the CC&R's and Articles of Incorporation. The CC&R's are COUNTY level and the AI are STATE level. As for by-laws, rules/regs, or architectural reviews(ACC) those are typically NOT required to be filed anywhere but with the HOA IF they exist. They don't always exist. Sometimes out of courtesy the by-laws are filed with the CC&R's but not required. These are also the documents the SELLER is to provide the potential buyer as well before the closing. (Time line before closing can be up to the day of the closing so ask beforehand).

Now many of you would also like to know the financial condition or general condition of the HOA. A HOA is indeed a corporation and they are required to provide a certain amount of information to it's MEMBERS. In a big corporation with stockholders that is referred to as a "Prospectus". They are required to provide this to ALL STOCKHOLDERS which is to include if they are involved in lawsuits and where the money is going, If you ever read one, it's a long pamphlet of information basically. However, it is for stockholders ONLY. Why do I mention this? Because the HOA's financial information is for HOMEOWNER'S/MEMBERS ONLY!!!

Let's put this into perspective. A POTENTIAL BUYER is basically someone who has walked by your house and say's "I like your house how much is it?". They are NOT a member of the HOA. That does NOT entitle one to HOA privileged information. Which most would consider the financial status, meeting notes, and certain information within the meeting walls. One does not date someone and then says "I want to see your checking account" before there's even an offer of marriage? Once your married you best be able to see the checking account...

Financial institutions are a bit different. They don't live there but their money does. They work off of paperwork. So they do have a PUD form they have the HOA fill out to list such things as fee simple, rental occupancy, lawsuits, liens, foreclosure, and collection/expenditure information. Not all lenders do this but many are going in that direction. The potential buyer and seller are not involved in this process. It's just for the mortgage companies to gauge their risks and adjust their loan rates/offerings. It may or not be in your closing documents. It's mostly for the mortgage companies eyes.

Now, even if you do NOT receive a copy of the rules, you are still bound by them. I've heard that Florida has one sign off that they have read them if your a board member. Whether or not you sign off that sheet or not, your still bound by the rules/regulations. Which means you still have to pay your dues or face lien/foreclosure. Protesting or stating I wasn't informed does NOT exempt you.

I would like to point out that some HOA's do provide a "Package" to new members. It may be a brochure (This is what I did) or it may be an entire package with the CC&R's and general HOA information. This is considered a COURTESY by the HOA and is NOT required. It does cost money for providing this information so a HOA may charge a small amount of money to cover the cost of production. It really depends on the HOA and how they like to keep people informed or requirements they do. Each HOA is different. Some have meetings once a month to some once a year. Some require OPEN meetings and others can be closed. I can't speak for each and every HOA out there. However, they all should be run by VOLUNTEERS who are your NEIGHBORS. Let's not think you just bought into a "Professional" lion's den of operation. Once your a member, then meetings are your BEST source of information about your HOA. Whether or not you attend is again on you.

As for rights to review documents. Those again are granted once you are a homeowner/member. You may be charged if you want copies. You may have to set up an appointment to view. The records you are looking for may not even exist. It could be a very disappointing dry search if your trying to "witch hunt" your way through documents. Your most likely just going to be able to see the expenditure reports and just your record of collection history. If you want to review records, then KNOW exactly what records you want to see or need. Even if you go to court, these records will be provided during "discovery" any ways. So don't think your HOA is hiding much because even in court those records will appear. If you don't get your answer your looking for, then maybe your asking the wrong question.

In the end... It is viewed as the buyer's responsibility to be informed. It is the seller's courtesy or responsibility to inform the potential buyer. It is your responsibility once you become a HOA to abide by the rules and pay your dues. Finally keep these facts in mind:

1. A HOA is ONLY operated by it's members FOR it's members. The members have the power to make rule or board changes.
2. A HOA is ONLY FUNDED by it's members FOR it's members. The ONLY money a HOA has is the money the members pay in. You all want something done or bought, expect to have higher dues or special assessments.
3. Suing your HOA is suing yourself and your neighbors. Refer to #2. If your HOA is ONLY funded by it's members, then if you sue the HOA, your suing everyone that is a member of the HOA. Which includes yourself. So if your "protecting" a large group of people in your lawsuit (and mind) then you better have a large amount of people paying your legal costs with you. Otherwise, it's best to use that large majority of people who see things your way, to use their HOA voting power to make changes without ever going to court. HOA changes do NOT have to go to court to be resolved. The HOA documents provide the members on a way to indeed do it all "in-house" and amongst themselves. A much better result, less money, and solid true changes take place that way. If you do need to sue, then understand the HOA lawyer is NOT your lawyer, and you will be paying BOTH ends. It's up to you to decide if that route is worth it and then pursuit. No one can tell you different.

Former HOA President

TimB4 (Tennessee)
Posts: 21,059

Posted:

Melissa,

I wish you had better defined the topic. When I first saw the topic I thought you were referencing what documents a member is entitled to. I now see that the issue is what documents are potential buyers entitled to.

In my opinion, potential buyer are entitled to ask for any document that they believe they need to make an informed decision on purchasing the property. If the seller is unable or unwilling to provide those documents, or if there is a charge for the documents that the potential buyer is unwilling to pay, then the decision of continuing to consider the property for purchase needs to be made.

OH, as for PUD statements, our Association actually includes one with the disclosure package. Additionally, for us, the seller is involved in the process as our Association (since we provide a PUD statement for free) will charge a fee if the bank requires the information to be filled out on their forms (some do, many do not require their own forms to be completed). That fee is charged to the member. Therefore, it's the members decision if we are to complete the forms or not.

I think it's really difficult to have a generalized topic on what documents potential buyers are entitled to see or not. This is, as you pointed out, because the laws vary from State to State and all potential buyers need to read the applicable documents in that State to be sure.

FrankS10 (Kansas)
Posts: 276

Posted:

Melissa,

You are not a lawyer, and there is probably many good reasons why you are a 'Former HOA President'. Federal and state law will dictate what buyers are entitled to, and I would ask for everything I wanted before purchasing.

BanksS
Posts: 403

Posted:

On this topic I pay no attention to and do not read what Melissa posts. I suggest the rest of you do the same.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Keep in mind each home sale is different. Each buyer is different and each seller is different besides just the HOA's. You can't post everything that will fit every situation. It is up to EACH POTENTIAL BUYER to know what information they want before the sign the dotted line. Once they sign that line, then all bets are off it being someone else's fault.

I always use a "Buyer's agent" when purchasing a home. It's better option and they will "split" the 6% fee between the seller's realtor and themselves. Any realtor can act as such if they choose and can be both seller/buyer agents. If you choose to use a Buyer's agent, then they are more likely to provide you with additional documents and research.

It really depends on the education of the potential buyer, when one purchases a home. Not everyone wants to know all of this information. Just want to know is it in a HOA or not? If it is, then when and where do I pay the dues? Some buyers may want to know every little detail of the place before buying. Then it is up to them to ASK for what documents they want to see. However, don't expect the HOA to just gladly hand over their documents freely or free. Understand, they do have the right to say no or to charge for it.

All in all, it is you as a buyer who must make the best decision and to be the best informed. You may have all these documents in your hands, and still decide to buy the place. In the end, your still the buyer and you bought into it with eyes open or eyes shut.

As for the seller, I see so many posters here claiming that they will never buy into a HOA again and are going to sell. My question to them is: What documents do you then provide to your potential buyer? If you want to sell and get out because your HOA is so crooked... Then do you want your potential buyer to see this information? Doesn't seem you will sell your home very well... Who then comes across as the "crooked" one or hiding information? Mmmm..

Former HOA President

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Oh and may I state that one should always avoid advice from people they don't like advice on this site. You should always take advice from those you do like. It's much more educating to only hear what you want to hear. It makes what you have to say to everyone else much more appealing.

Really? That's just wrong to post to people not to take someone's FREE advice. Like it or don't like it. It's up to the person who reads it to decide NOT other posters. It's called respect have some for yourself.

Former HOA President

JohnB26 (South Carolina)
Posts: 1,569

Posted:

MellissaP1 actually got this one exactly correct.

Her data,as she stated, may be modified by specific state law.

The prospective purchaser's attorney should request from the HOA two items:

1) letter of estoppel

2) answer to :"Are there any 'special assessments' presently due or CONTEMPLATED?"

failure to disclose would risk PERSONAL liability for the BOD

if the BOD has discussed (contemplated) the need for a near term special assessment & does not disclose same, that would be malfeasance

HOWEVER

Caveat Emptor would be satisfied by the buyer hiring a competent attorney who in fact asks the proper questions

RichardP13 (California)
Posts: 1,767

Posted:

Quote:

Posted By JohnB26 on 02/16/2014 8:08 AM
MellissaP1 actually got this one exactly correct.

Her data,as she stated, may be modified by specific state law.

The prospective purchaser's attorney should request from the HOA two items:

1) letter of estoppel

2) answer to :"Are there any 'special assessments' presently due or CONTEMPLATED?"

failure to disclose would risk PERSONAL liability for the BOD

if the BOD has discussed (contemplated) the need for a near term special assessment & does not disclose same, that would be malfeasance

HOWEVER

Caveat Emptor would be satisfied by the buyer hiring a competent attorney who in fact asks the proper questions

How many states required the use of an attorney?

RichardP13 (California)
Posts: 1,767

Posted:

Quote:

Posted By MelissaP1 on 02/16/2014 5:48 AM
We seem to get this issue a lot on here. Some posters even suing their HOA because of no provided documents. It's time to clear up what is your "right" and what is "courtesy". Considering many people don't know they have joined a HOA or they don't receive copies of the proper paperwork. Plus who is responsible for supplying this information and should you pay for it?

The law in most states is that it is the BUYER's responsibility to be INFORMED. How that is done exactly varies but in the end the law views it as the buyer's responsibility/fault. In general, your Realtor, loan officer, closing lawyer, Title company, home inspector, house insurer, HOA, and even the seller are NOT responsible for providing you the documents. CAVEAT: There are a handful of states that do require the SELLER to hand over the rules to the potential buyer. That is something you should ask your realtor or do some research on to see if that is required in your state. Can you sue if they don't? That will be up to you if the seller did not provide as required. The suit would be against the seller ONLY.

The documents you can view at any time are those considered "PUBLIC". Those documents are at your local courthouse in the records department. They also may be online in some states. Those documents considered "PUBLIC" are the CC&R's and Articles of Incorporation. The CC&R's are COUNTY level and the AI are STATE level. As for by-laws, rules/regs, or architectural reviews(ACC) those are typically NOT required to be filed anywhere but with the HOA IF they exist. They don't always exist. Sometimes out of courtesy the by-laws are filed with the CC&R's but not required. These are also the documents the SELLER is to provide the potential buyer as well before the closing. (Time line before closing can be up to the day of the closing so ask beforehand).

Now many of you would also like to know the financial condition or general condition of the HOA. A HOA is indeed a corporation and they are required to provide a certain amount of information to it's MEMBERS. In a big corporation with stockholders that is referred to as a "Prospectus". They are required to provide this to ALL STOCKHOLDERS which is to include if they are involved in lawsuits and where the money is going, If you ever read one, it's a long pamphlet of information basically. However, it is for stockholders ONLY. Why do I mention this? Because the HOA's financial information is for HOMEOWNER'S/MEMBERS ONLY!!!

Let's put this into perspective. A POTENTIAL BUYER is basically someone who has walked by your house and say's "I like your house how much is it?". They are NOT a member of the HOA. That does NOT entitle one to HOA privileged information. Which most would consider the financial status, meeting notes, and certain information within the meeting walls. One does not date someone and then says "I want to see your checking account" before there's even an offer of marriage? Once your married you best be able to see the checking account...

Financial institutions are a bit different. They don't live there but their money does. They work off of paperwork. So they do have a PUD form they have the HOA fill out to list such things as fee simple, rental occupancy, lawsuits, liens, foreclosure, and collection/expenditure information. Not all lenders do this but many are going in that direction. The potential buyer and seller are not involved in this process. It's just for the mortgage companies to gauge their risks and adjust their loan rates/offerings. It may or not be in your closing documents. It's mostly for the mortgage companies eyes.

Now, even if you do NOT receive a copy of the rules, you are still bound by them. I've heard that Florida has one sign off that they have read them if your a board member. Whether or not you sign off that sheet or not, your still bound by the rules/regulations. Which means you still have to pay your dues or face lien/foreclosure. Protesting or stating I wasn't informed does NOT exempt you.

I would like to point out that some HOA's do provide a "Package" to new members. It may be a brochure (This is what I did) or it may be an entire package with the CC&R's and general HOA information. This is considered a COURTESY by the HOA and is NOT required. It does cost money for providing this information so a HOA may charge a small amount of money to cover the cost of production. It really depends on the HOA and how they like to keep people informed or requirements they do. Each HOA is different. Some have meetings once a month to some once a year. Some require OPEN meetings and others can be closed. I can't speak for each and every HOA out there. However, they all should be run by VOLUNTEERS who are your NEIGHBORS. Let's not think you just bought into a "Professional" lion's den of operation. Once your a member, then meetings are your BEST source of information about your HOA. Whether or not you attend is again on you.

As for rights to review documents. Those again are granted once you are a homeowner/member. You may be charged if you want copies. You may have to set up an appointment to view. The records you are looking for may not even exist. It could be a very disappointing dry search if your trying to "witch hunt" your way through documents. Your most likely just going to be able to see the expenditure reports and just your record of collection history. If you want to review records, then KNOW exactly what records you want to see or need. Even if you go to court, these records will be provided during "discovery" any ways. So don't think your HOA is hiding much because even in court those records will appear. If you don't get your answer your looking for, then maybe your asking the wrong question.

In the end... It is viewed as the buyer's responsibility to be informed. It is the seller's courtesy or responsibility to inform the potential buyer. It is your responsibility once you become a HOA to abide by the rules and pay your dues. Finally keep these facts in mind:

1. A HOA is ONLY operated by it's members FOR it's members. The members have the power to make rule or board changes.
2. A HOA is ONLY FUNDED by it's members FOR it's members. The ONLY money a HOA has is the money the members pay in. You all want something done or bought, expect to have higher dues or special assessments.
3. Suing your HOA is suing yourself and your neighbors. Refer to #2. If your HOA is ONLY funded by it's members, then if you sue the HOA, your suing everyone that is a member of the HOA. Which includes yourself. So if your "protecting" a large group of people in your lawsuit (and mind) then you better have a large amount of people paying your legal costs with you. Otherwise, it's best to use that large majority of people who see things your way, to use their HOA voting power to make changes without ever going to court. HOA changes do NOT have to go to court to be resolved. The HOA documents provide the members on a way to indeed do it all "in-house" and amongst themselves. A much better result, less money, and solid true changes take place that way. If you do need to sue, then understand the HOA lawyer is NOT your lawyer, and you will be paying BOTH ends. It's up to you to decide if that route is worth it and then pursuit. No one can tell you different.

Melissa

Would you mind sighting the law(s) that state it is the buyer's responsibility to obtain the documents. You are quite clueless in this matter.

RichardP13 (California)
Posts: 1,767

Posted:

Melissa

I am not a stockholder or shareholder of any company trading in the Stock Market, yet I can find their financial information all over the internet and if I ask for a company's annual report it would be gladly sent to me.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Would you state the laws that do not? There are 50 states... I am NOT going to do that research for you or anyone. I do NOT represent myself as a lawyer and I do NOT post laws as if I am. It is YOUR responsibility as a buyer to do your own research on the items YOU want to know.

This is a GENERAL posting on how things work on a laymans view. I do NOT interp laws or practice law. I know enough to now know what I should be asking when I do.

Former HOA President

RichardP13 (California)
Posts: 1,767

Posted:

Melissa

Instead of offering suggestions for changes to improve HOA's, you constantly make lame excuses of why things are done the way they are. That's a "leader".

RichardP13 (California)
Posts: 1,767

Posted:

Quote:

Posted By RichardP13 on 02/16/2014 8:30 AM
Melissa

I am not a stockholder or shareholder of any company trading in the Stock Market, yet I can find their financial information all over the internet and if I ask for a company's annual report it would be gladly sent to me.

"The law in most states is that it is the BUYER's responsibility to be INFORMED" Name me one.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Those are publicly trading companies and for profit. A HOa is a non profit non charitable privately owned corporation. They are responsible to their members ONLY. A HOA member is not a stockholder in the same sense of a stockholder in a for profit corp. Their money is for the sole purpose of opration costs of their HOA. Other stockholders are there for profit and share holding. Difference is HOA members are invested in their community by making it attractive to potential buyers, Corporations do it for profit and making money.

Former HOA President

BanksS
Posts: 403

Posted:

Quote:

Melissa says its a courtesy for the HOA to provide the documents/information and you say failure to disclose would risk PERSONAL liability for the BOD. So which is it?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Point out how it is not up to the buyer anywhere to be informed? I can give you every document in the world, still can NOT make you read them. In the end, it is your responsibility informed or not, when you sign that dotted line. Who here read ALL of their closing documents at closing? Most here post they went through their docs AFTER they were given the docs at closing. They were informed and the lawyer will state as much.

In the end, live up to your responsibilty and consequences of such. No need to blame other for YOUR actions. If you look for someone to blame, then you look more irresponsible yourself.

Former HOA President

RichardP13 (California)
Posts: 1,767

Posted:

Quote:

Posted By MelissaP1 on 02/16/2014 8:41 AM
Those are publicly trading companies and for profit. A HOa is a non profit non charitable privately owned corporation. They are responsible to their members ONLY. A HOA member is not a stockholder in the same sense of a stockholder in a for profit corp. Their money is for the sole purpose of opration costs of their HOA. Other stockholders are there for profit and share holding. Difference is HOA members are invested in their community by making it attractive to potential buyers, Corporations do it for profit and making money.

I have a birthday party to attend. I'll get back to this.

RichardP13 (California)
Posts: 1,767

Posted:

Quote:

Posted By MelissaP1 on 02/16/2014 8:49 AM
Point out how it is not up to the buyer anywhere to be informed? I can give you every document in the world, still can NOT make you read them. In the end, it is your responsibility informed or not, when you sign that dotted line. Who here read ALL of their closing documents at closing? Most here post they went through their docs AFTER they were given the docs at closing. They were informed and the lawyer will state as much.

In the end, live up to your responsibilty and consequences of such. No need to blame other for YOUR actions. If you look for someone to blame, then you look more irresponsible yourself.

Only the documents that were provided, which wasn't many.

BanksS
Posts: 403

Posted:

Quote:

Posted By BanksS on 02/16/2014 8:48 AM

Melissa says its a courtesy for the HOA to provide the documents/information and you say failure to disclose would risk PERSONAL liability for the BOD. So which is it?

Melissa also said that if you are not a member, the HOA doesn't have to give it to you. So my point is, there are some contradictions here. Buyer be informed but it's at the discretion of the HOA to provide it to you if you aren't a member. This is what I call a vicious circle.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sorry was it supposed to be a straight line connecting the dots? Your right it is a vicious circle if you look at it that way. However, if your a realtor, seller, loan officer, or HOA involved in the sale of a home, then it is called protection from being sued because of buyer regret or ignorance. You want that too when you sell your home...

Former HOA President

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By JohnB26 on 02/16/2014 8:08 AM

The prospective purchaser's attorney should request from the HOA two items:

1) letter of estoppel

The title company and the lender will require this during escrow. The lender will not usually lend if there is a lien on the property. Someone, usually the seller, will have to pay this before the new loan will be funded.

Quote:

Posted By JohnB26 on 02/16/2014 8:08 AM

2) answer to :"Are there any 'special assessments' presently due or CONTEMPLATED?"

failure to disclose would risk PERSONAL liability for the BOD

if the BOD has discussed (contemplated) the need for a near term special assessment & does not disclose same, that would be malfeasance

HOWEVER

Caveat Emptor would be satisfied by the buyer hiring a competent attorney who in fact asks the proper questions

An unpaid special assessment would normally show up as a lien at closing and would be stated in the estoppel letter.

I am unaware of any legal requirement for the board of directors to disclose that they have "contemplated" a special assessment. Perhaps you could cite the statutes requiring such disclosure and the one that would make failure to disclose a personal liability for board members who are not parties to the sale.

In my state, it is entirely the duty of the seller to disclose this information but only if the buyer asks. Whether the seller is required to disclose certain details is a matter of statute but the courts hold that even if there is no duty to voluntarily disclose there is a duty for the seller to truthfully answer any questions raised by the buyer.

It is not customary in AZ for either the buyer or seller of residential property to be represented by an attorney at any point in the sale. Licensed real estate agents, licensed escrow companies, and licensed title companies seem to be able to handle the sale of homes fairly well without the need for lawyers.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

you have the right to:

read the CC&Rs at the county courthouse along with any other public records

get the articles of incorporation from your secretary of state along with any other public records

have your attorney request a 'letter of estoppel' which also would be REQUIRED in order to get a mortgage

ask for a response IN WRITING to the special assessment question
(if answered, the answer must be FACTUAL, if unanswered ??)

you do NOT have a right (before purchase/membership) to:

minutes
dues records
rules and regulations (as they may or may not be compliant with the contract, ie. CCRs)
directors names
or any other corporate business / records not PUBLICLY recorded

however, state law(s) may make other provisions

JohnB26 (South Carolina)
Posts: 1,569

Posted:

I am unaware of any legal requirement for the board of directors to disclose that they have "contemplated" a special assessment. Perhaps you could cite the statutes requiring such disclosure and the one that would make failure to disclose a personal liability for board members who are not parties to the sale.

In my state, it is entirely the duty of the seller to disclose this information but only if the buyer asks. Whether the seller is required to disclose certain details is a matter of statute but the courts hold that even if there is no duty to voluntarily disclose there is a duty for the seller to truthfully answer any questions raised by the buyer.

1) there is no legal requirement to disclose, but, there is a legal requirement to be truthful - a prospective buyer has a right to question (caveat emptor) and would be within reason (the basis of common law) to base a decision upon the written answer received - the BOD may choose to answer or not, but the response must be accurate

2) ?how would the seller know about a BOD discussion of a special assessment?

imo: perhaps part of Nevada's and Arizona's RE problems would be the lack of 'proper' legal input

JohnB26 (South Carolina)
Posts: 1,569

Posted:

BanksS,

please reread my post

the HOA is NOT required to provide ANY documents prior to sale (barring state law to the contrary)

a competent attorney will request :
a) letter of estoppel
b) ?special assessments being contemplated?

these two items would satisfy the legal concept of 'caveat emptor'

corporate documents do NOT include publicly recorded CC&Rs

GlenL (Ohio)
Posts: 5,491

Posted:

The problem IMHO is that neophyte home buyers don't have the expertise to know which documents they should ask to see or more importantly NEED to see before they sign on the dotted line.

Studies show that 5 out of 4 people have problems with fractions

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Exactly Glen... That is one part of the reason I posted this. It should let people know what documents should I have, where are they, and who is responsible for providing. Next time you buy in a HOA or are thinking you never were given the information, be educated on what to ask and find.

Former HOA President

JohnB26 (South Carolina)
Posts: 1,569

Posted:

DOH

that why any reasonable person would have a real estate attorney to act on their behalf

as Dirty Harry said:

'a man has gots to know his limitations'

BanksS
Posts: 403

Posted:

Quote:

Posted By JohnB26 on 02/16/2014 10:07 AM
BanksS,

please reread my post

the HOA is NOT required to provide ANY documents prior to sale (barring state law to the contrary)

a competent attorney will request :
a) letter of estoppel
b) ?special assessments being contemplated?

these two items would satisfy the legal concept of 'caveat emptor'

corporate documents do NOT include publicly recorded CC&Rs

So what you are saying is the buyer or the buyer's agent must ask the questions. If the HOA does not answer or does not answer completely and correctly then that is where the liability to the HOA may come into the picture. Correct?

I experienced this when I purchased my property. In my case, the questions were asked but incomplete answers were given. I believe this is why the HOA finally gave up on their lawsuit against me and settled. Their attorney recommended it because I personally asked the questions in writing and they gave incomplete answers.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

there is no real liability if the HOA fails or refuses to answer

however, if answered, the answer must be accurate

further:

if no answer, who in their right mind would purchase?

imo:

the 'trick' is to know what question(s) to ask

only your attorney knows for sure

like a realtor once told me:

'if an honest INDEPENDANT inspection were to be performed 1/2 of all sales would fall through'

BanksS
Posts: 403

Posted:

Quote:

Posted By JohnB26 on 02/16/2014 11:15 AM
there is no real liability if the HOA fails or refuses to answer

however, if answered, the answer must be accurate

further:

if no answer, who in their right mind would purchase?

imo:

the 'trick' is to know what question(s) to ask

only your attorney knows for sure

like a realtor once told me:

'if an honest INDEPENDANT inspection were to be performed 1/2 of all sales would fall through'

Very true. And if we all knew what the neighbors were really like most sales would fall through and when you throw an HOA into the mix. Wow!!! Now that is tricky.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By JohnB26 on 02/16/2014 10:02 AM

1) there is no legal requirement to disclose, but, there is a legal requirement to be truthful - a prospective buyer has a right to question (caveat emptor) and would be within reason (the basis of common law) to base a decision upon the written answer received - the BOD may choose to answer or not, but the response must be accurate

2) ?how would the seller know about a BOD discussion of a special assessment?

imo: perhaps part of Nevada's and Arizona's RE problems would be the lack of 'proper' legal input

Gee, I was unaware of any widespread real estate problems in AZ. Silly me!

In AZ the buyer has a right to a truthful response from the seller. If the association is not the seller it has no duty to respond to a buyer except as set forth in ARS 33-1806. I found no duty to disclose that the association is considering taking any action that may or may not occur in the future.

So, if the law does not require the seller or the association to disclose what its BOD may have discussed doing in the future but has not done and may never do, where does it become a personal liability of a board member to disclose this to a person he has no business relationship with?

JohnB26 (South Carolina)
Posts: 1,569

Posted:

you are correct

there is no OBLIGATION for the BOD to disclose

the BOD may choose to not answer the question

or

answer it: 'there are no special assessments payable at this time' (a very cagey avoidance)

but

they may NOT state that none are contemplated when the future need for an assessment has in fact been discussed

if a director lies (in their capacity as a director) and the lie damages a person then they could/would be liable (not covered by D&O)

imo: if I asked that ? and it were NOT answered I would run run run away

ps. this is a ? routinely asked by the law firms handling real estate sales in my neck of the woods - Myrtle Beach area, SC and my HOA's answer is as above

ChrisA13 (New Jersey)
Posts: 120

Posted:

Quote:

Yes, you can. And there is the difference. You can find out if YOU want to invest YOUR MONEY in their CORPORATION.

Why would that same protection not apply to an HOA/COA? A buyer can't get access unless the seller provides it. But a seller is not required to provide it to a buyer in many states.

I can see no reason why all records involving these non-profits shouldn't be made public. What's to hide? There are no trade secrets. Have a portfolio. Make it public. What's to hide? I don't get the secrecy at all.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

HOA's are PRIVATE non-profit corporations. They are NOT in the PUBLIC domain. Non-profit charitable Corporations like the Red Cross do indeed publish their information. HOA's being privately owned don't need to publish their financials PUBLICLY. They do have to allow the members to view the documents upon request. Which means the MEMBERS do have access to the documents. It's just NOT to potential buyers or those walking down the street.

Not to say that some HOA's do not allow potential buyer's to view this information. That is where the "courtesy" part comes in. The HOA is NOT required to provide that information until you are a member. However, they can at their discretion allow you to view if you ask and make a request. Some HOA's do make their own "packages" with various bits of information. That may be the collection rate and amount of dues. They will NOT give you a list of names of people who owe money, involved in lawsuits, liened, or foreclosure. Liens and foreclosure are already PUBLIC information. Lawsuits are a toss up depending on what the court has ruled.

My question is why would you want to provide this information anyways if your trying to sell your home? Seems counter-intuitive if you want to get out.

Former HOA President

CarolR11 (Colorado)
Posts: 2,563

Posted:

As we can see in Melissa's second thread on this topic today--as posted by David and me-- there are some states that do permit buyers to see all kinds of information prior to the close of the sale--not merely "rules." In CA, for example, sellers must disclose a great deal of info to buyers. Sellers get this info from their HOA board or management company, which may charge for copies, etc. So, supplying these materials is not merely a "COURTESY" in CA and in VA and perhaps in several other states.

Since Melissa has owned at least two homes in AL HOAs, I asked her in her other thread to let us know AL's laws, if any, on this matter. Surely, as a former HOA president, she knows something about her state's HOA laws??

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Surely your not going to rely on and goad me into posting that crap are you? Since your not living in Alabama and non of the laws I would post would apply to your HOA or anyone else's outside of Alabama. No I will not post links to far away laws and rules I do not have the right to practice or pretend to know. Like it or don't like. Not going to post laws for yours or anyone else's benefit because I do NOT practice law and will NOT pretend I do. End of story.

Former HOA President

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By ChrisA13 on 02/16/2014 1:13 PM

I can see no reason why all records involving these non-profits shouldn't be made public. What's to hide? There are no trade secrets. Have a portfolio. Make it public. What's to hide? I don't get the secrecy at all.

I agree to a point. This is why we have everything but lot ledgers on our Associations web site (minutes are for members only). Mind you, this got done because I volunteered to do it. The Board didn't have objection to it, they just didn't want to take the time to do the work themselves. Therefore, because I thought it should be done, I volunteered and learned how to administrate the Assocaitions website. I then took the time (and it was a lot) to digitize all Association documents and post them on the site. If this continues when I decide to no longer volunteer my time will be up to the membership. If no-one steps up, then what has been done will be done and the members would have spoken that they don't care if the information is there or not.

Additionally, the Board also has a fiduciary responsibility to protect your privacy (privacy laws also apply). Therefore, it's not likely that individual ledger files will be available for any lot but your own.

As a side note: Chris, your advice can cut both ways. If you recall my reply in your initial post:

Quote:

Posted By TimB4 on 02/03/2014 9:46 PM
Chris,

Curiosity got the better of me and I did look at your site.

The first thing I noticed is that even though you claim transparency, you don't have copies of the court filings, court rulings, etc. Although I see copies of letters you sent to various entities, you provide no copies of their response.

Just an observation.

Tim

ChrisA13 (New Jersey)
Posts: 120

Posted:

Quote:

Tim, I don't owe transparency to this forum. Not at all. And I don't owe transparency to my neighbors. I have no fiduciary duty to anyone. You realize that, right? There is a difference between my COA and me in that they, the corporation, are in control of MY assets. They owe me the transparency because they can harm me and my investment.

Without question, the members of my COA have a right to know about the litigation they are funding. They have a right to know about everything. Yet if they ask and are denied from the BOD, that's on them to fight that fight. But the duty to disclose belongs to the corporation. I have no duty to anyone, not in the law or governing documents. And certainly not as a blogger in this forum.

If we go back to my posts, you'll see I did not come here to discuss legal cases -- I came to address the illegal use of the company's funds to pay for a law firm's defense in a civil matter and the defense of two members who were not indemnified as trustees.

And I'm sticking to that.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By ChrisA13 on 02/16/2014 3:28 PM

Tim, I don't owe transparency to this forum. Not at all. And I don't owe transparency to my neighbors. . . . You realize that, right?

I do realize that.

I was just pointing out that, even on your own website, that calling for transparency from others yet failing to provide it yourself (at least on your own website) can make you appear hypocritical to others. If you were unaware of that appearance, you may want to change it either by being more transparent yourself or by not calling for transparency from others. If you were aware of that appearance, my comment shouldn't have gotten under your skin.

Quote:

Posted By ChrisA13 on 02/16/2014 3:28 PM

I have no fiduciary duty to anyone.

I disagree. You, at the very least, have a fiduciary duty to your family.

Quote:

Posted By ChrisA13 on 02/16/2014 3:28 PM

If we go back to my posts, you'll see I did not come here to discuss legal cases -- I came to address the illegal use of the company's funds to pay for a law firm's defense in a civil matter and the defense of two members who were not indemnified as trustees.

Which, in my opinion, is a legal issue and, in reality, something that none of us (unless someone is a member of your Association) can affect.

We can learn from it and take steps to make sure it doesn't happen in our Association. However, since you are unwilling to share specifics (and I understand not sharing specifics as the case is still working it's way through the legal system and what is posted on a public forum may unintentionally come back and hurt your case) it's difficult for us to even do that.

Per your postings, it appears that specific issue appears to be unique as they are caused by your governing documents and the laws of NJ and likely won't become an issue for Associations in other States.

Hopefully, this site has been able to assist you in giving you ideas on how to approach your State legislatures on how to amend NJ laws (if that is your desire).

JohnB26 (South Carolina)
Posts: 1,569

Posted:

Why would that same protection not apply to an HOA/COA? A buyer can't get access unless the seller provides it. But a seller is not required to provide it to a buyer in many states.

precisely - don't buy

CASVEAT EMPTOR

CarolR11 (Colorado)
Posts: 2,563

Posted:

But, see above, some states DO REQUIRE that sellers disclose a great deal of information and provide materials to prospective buyers. I don't know if it's a few or "many" who do not protect buyers in this way. No one else seems to know either.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I never said seller's were not responsible. The HOA is NOT responsible to the buyer. The seller is responsible but NOT in every state. It is best to do your own research for own state/situation.

Former HOA President

ChrisA13 (New Jersey)
Posts: 120

Posted:

Posted By TimB4 on 02/16/2014

I disagree. You, at the very least, have a fiduciary duty to your family.

Posted By ChrisA13 on 02/16/2014 3:28 PM

No, Tim. Speaking in fact and not feeling, I owe a fiduciary duty to no one. Absolutely no one. If I choose to care for my family financially (which again should not be an issue brought up in such a forum because it clearly is not a matter for public discussion), that's my choice == not the law. And I think you know that.

As per "getting under my skin," I wouldn't respond to you if I felt you were being annoying for the sake of being annoying. Yet to be sure, there is no need to "read into" what I'm saying. I'm clear as to what I'm saying and that's why I know what I've said.

Fact, I don't have to do anything for anyone, including the people in my COA. I think you know I'm right on this. And if someone deems me a hypocrite, so be it. I think this forum is a perfect example that a number of fools without the facts or information will say whatever they want -- fact, fiction, insult, otherwise -- and you can't stop them. So if people think I'm a hypocrite, I could care less.

As I said, I do what I am required to do in the law and what I want to do as a person. No one is going to put their expectations on me as to what I owe them. I know who I owe and what. And I'm doing more than my share and have done more than most to change major issues around here. By choice. I owe no more... regardless of perception. I have my reasons why I do what I do...including posting things here. There are reasons for everything, I don't anyone an explanations at to why I do anything. And neither do you...

As per the paying of legal expenses, it's not a legal issue. It wasn't posted as a legal issue, it was posted as an issue of funds used in a COA. The use of maintenance fees is defined in the law in NJ. So it was an HOA/COA issue I was attempting to address when this entire issue went off the rails. People should be looking into their COAs retainer agreements and the costs being charged to them by the corporation's attorneys. I think they'd find it interesting. Very interesting.

With this said, I hope we can get the topic back on track because I think too many people have gotten way too personal. And some for malicious purposes. Besides, I thought this was supposed to be a site to discuss COA/HOA topics. That's all I choose to address.

ChrisA13 (New Jersey)
Posts: 120

Posted:

Quote:

Posted By CarolR11 on 02/16/2014 4:12 PM
But, see above, some states DO REQUIRE that sellers disclose a great deal of information and provide materials to prospective buyers. I don't know if it's a few or "many" who do not protect buyers in this way. No one else seems to know either.

NJ doesn't have this form of protection. It would be good to list who does/doesn't...but the reality is that the issue is disclosure. People are not buying a one-year contract with a gym that they can leave if it gets dirty, these are their homes. Real investments. Disclosure should be something that should be a federal law. Whatever the FHA gets to feel certain in securing their loans via their approval should be exactly what a new owner should get if not more.

In truth, communism didn't work because that "all for one and one for all" thing never works. It doesn't work in HOA/COAs either. We are all one, but only when that comes to paying but not showing the cards. And clearly, in NJ, you don't have to sign off on the rules but you are automatically obligated to a contract as a member. What other contract situation works like that when only one party knows the terms and conditions before committing? Even with a car, you can test drive it before you buy it if you wanted. Buyers have no right to know the finances or "test drive" before they buy. That doesn't sit well with me at all.

RichardP13 (California)
Posts: 1,767

Posted:

I believe a buyer is entitled to information about the HOA prior to them purchasing. This would be done through escrow. This isn't a person, as Melissa pointed out that walks down the street and says I want that house, no this is a person who has signed a purchase contract, through a Realtor and has put down good faith money, sometime $100K to purchase said house. Like an investor, they also should know what the risk is. Again, as Melissa wrongly pointed out, IF the seller knows there is specific problems within the HOA, THEY have a duty to disclose, that's the law!

California has certain rules about what the seller is to disclose to the prospective buyer and the list is pretty extensive. In California, we don't have a county courthouse where you can get PUBLIC documents, such as the CCRs. We don't employ attorney to buyer a house. Good luck with getting anything with the Secretary of State, I tried. Operating Rules, better knows as Rules and Regulation HAVE to be disclosed. Can't just say they are in your CCR's. Most CCRs only state the Board has the power to create "fair and reasonable" rules. So how do you know if you can abide by the rules, if you haven't seen them until too late.

For associations that have a managing agent or management company, the beautiful part is we make money on disclosing the information. Once the original information for an association is uploaded onto a remote site, it takes me no more that 15 minutes to prepare a escrow request. Escrow officer is happier than a pig in heat. Best part, I make $500-$600 on each transaction and pay the electronic service $55. My monthly office is always paid for with these transaction. All done in one PDF file.

Once escrow has closed, I receive a copy of the grant deed that the buyer is now an official owner and a comprehensive welcome package is mailed to the new owners along with a $100 gift card paid out of the proceeds of the escrow transaction (no cost to the HOA). The information given to the new owner is based on my experience as a new owner 6 years ago, individuals that came to this site and calls I received working for two management companies. From the beginning, as the agent for the association, I hope I have given them a positive approach to association living. That's what I get paid to do.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Part IV, "Protection of Purchasers," of Connecticut's Common Interest Ownership Act requires that developers and unit owners who are offering units for sale must provide prospective buyers with a copy of the HOA's Declaration (CCRs), Bylaws, Rules, and numerous other documents. Prospective buyers have a period of time to review the documentation and may cancel the sale during that time and receive a full refund of any deposit paid.

Since Connecticut's law is based on the Uniform Common Interest Ownership Act which has been adopted by a few other states, I would expect that similar requirements exist in Alaska, Colorado, Michigan, Nebraska, West Virginia, Delaware and Vermont.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

Part IV, "Protection of Purchasers," of Connecticut's Common Interest Ownership Act requires that developers and unit owners who are offering units for sale must provide prospective buyers with a copy of the HOA's Declaration (CCRs), Bylaws, Rules, and numerous other documents. Prospective buyers have a period of time to review the documentation and may cancel the sale during that time and receive a full refund of any deposit paid.

Since Connecticut's law is based on the Uniform Common Interest Ownership Act which has been adopted by a few other states, I would expect that similar requirements exist in Alaska, Colorado, Michigan, Nebraska, West Virginia, Delaware and Vermont.

SheliaH (Indiana)
Posts: 6,964

Posted:

I’m inclined to agree with Melissa on this. One of the underlying issues I see on nearly every problem discussed on this site concerns documents:

I didn’t even know this was a HOA community – what the hell does that even mean?

The CCRs say this, but the Board did that – why?

Our Bylaws don’t say anything about X – now what do we do?

I want a bay window, but the ACR requirements require double hung - it’s MY house, why do I have to do what the )(*#*! Association wants?

And so on.

BankS, you said you asked certain questions of the HOA when you brought your property but got incomplete answers. Did you review your questions to see if, in fact, you specifically asked for certain information? When you got the answers and felt they were incomplete, did you ask for clarification? If you didn’t get it, did you ask the seller? If you still didn’t get more information, why did you buy the property?

When you’re buying something as expensive as a house, you need to know as much about that purchase as possible. If the HOA didn’t answer the question or provide complete or accurate information, the buyer needs to tread carefully before signing on the dotted line and certainly before opening his/her wallet. It’s what we do when we buy a car –we check out its features, do a test drive, perhaps have a mechanic check it out, if it’s a used car or read magazines like Consumer Reports to see how reliable it’s been.

Personally, I think potential homeowners should know whether a house is in a HOA, if membership is voluntary or mandatory, how much the assessments are and what they pay for, who runs the Association, what are the hot button issues, and so on – maybe 2/3rds of the stuff on this board would be avoided. To that end, I think every state should have legislation requiring this information by provided by the seller or developer, and a good HOA should prepare a document that could be signed at closing where the buyer acknowledges he/she has received a copy of the documents and agrees to comply with the rules of the Association.

But even if there is such a law, that won’t guarantee there won’t be issues, but at least you’d have something to start with. In the end, it is still the buyer’s responsibility to know what he/she’s getting into. Remember, the seller wants your money, so he/she is likely to say anything (or not) to get it. It’ll be too late after you sign the dotted line, so the SOP should be trust but verify and take your time before making a decision. You’ll find many answers by reading the documents, but don’t stop there – talk to the seller and perhaps some neighbors, especially if you’re unfamiliar with HOAs. If you don’t understand what the documents say, ask and keep asking until you understand. If you still don’t understand what you’re getting into or have a funny feeling about what you’ve been told, go in another direction.

Now, will this wreck sales in HOAs? I don't know - it probably will blow up some purchases. Then again, maybe it'll prompt more people to pay more attention to how their HOA is run and make sure it's financially stable, rules are enforced fairly and consistently, board members are well trained, and so on.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

CarolR11 (Colorado)
Posts: 2,563

Posted:

Say, Sheila, in CA and apparently several other states, sellers must provide to prospective buyers the documents you mention and many more prior to the close of the sale.

BanksS
Posts: 403

Posted:

Quote:

Posted By SheliaH on 02/19/2014 11:38 AM
I’m inclined to agree with Melissa on this. One of the underlying issues I see on nearly every problem discussed on this site concerns documents:

I didn’t even know this was a HOA community – what the hell does that even mean?

The CCRs say this, but the Board did that – why?

Our Bylaws don’t say anything about X – now what do we do?

I want a bay window, but the ACR requirements require double hung - it’s MY house, why do I have to do what the )(*#*! Association wants?

And so on.

BankS, you said you asked certain questions of the HOA when you brought your property but got incomplete answers. Did you review your questions to see if, in fact, you specifically asked for certain information? When you got the answers and felt they were incomplete, did you ask for clarification? If you didn’t get it, did you ask the seller? If you still didn’t get more information, why did you buy the property?

When you’re buying something as expensive as a house, you need to know as much about that purchase as possible. If the HOA didn’t answer the question or provide complete or accurate information, the buyer needs to tread carefully before signing on the dotted line and certainly before opening his/her wallet. It’s what we do when we buy a car –we check out its features, do a test drive, perhaps have a mechanic check it out, if it’s a used car or read magazines like Consumer Reports to see how reliable it’s been.

Personally, I think potential homeowners should know whether a house is in a HOA, if membership is voluntary or mandatory, how much the assessments are and what they pay for, who runs the Association, what are the hot button issues, and so on – maybe 2/3rds of the stuff on this board would be avoided. To that end, I think every state should have legislation requiring this information by provided by the seller or developer, and a good HOA should prepare a document that could be signed at closing where the buyer acknowledges he/she has received a copy of the documents and agrees to comply with the rules of the Association.

But even if there is such a law, that won’t guarantee there won’t be issues, but at least you’d have something to start with. In the end, it is still the buyer’s responsibility to know what he/she’s getting into. Remember, the seller wants your money, so he/she is likely to say anything (or not) to get it. It’ll be too late after you sign the dotted line, so the SOP should be trust but verify and take your time before making a decision. You’ll find many answers by reading the documents, but don’t stop there – talk to the seller and perhaps some neighbors, especially if you’re unfamiliar with HOAs. If you don’t understand what the documents say, ask and keep asking until you understand. If you still don’t understand what you’re getting into or have a funny feeling about what you’ve been told, go in another direction.

Now, will this wreck sales in HOAs? I don't know - it probably will blow up some purchases. Then again, maybe it'll prompt more people to pay more attention to how their HOA is run and make sure it's financially stable, rules are enforced fairly and consistently, board members are well trained, and so on.

You are making inaccurate assumptions so I will just leave it at that.

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