BettyO1 (California)
Posts: 104
Posts: 104
Posted:
Are HOA's required to disclose to buyers lawsuits that are filed but not served? This pertains to during the escrow.
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Lawsuit Disclosure
Started by BettyO1 • 15 replies • 2418 views
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TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Although I do believe that an Association should disclose any and all legal actions that they are involved in, it appears, per davis-stirling site, that there is no requirement to disclose this to the membership. However, there may be a requirement to disclose this to a lender (you would need to check the new rules that came out in 2008).
See http://www.davis-stirling.com/tabid/3597/Default.aspx#axzz22g5x5vrm
See http://www.davis-stirling.com/tabid/3597/Default.aspx#axzz22g5x5vrm
BruceF1 (Connecticut)
Posts: 2,535
Posts: 2,535
Posted:
Quote:
Posted By BettyO1 on 07/24/2014 3:28 PM
Are HOA's required to disclose to buyers lawsuits that are filed but not served? This pertains to during the escrow.
Are HOA's required to disclose to buyers lawsuits that are filed but not served? This pertains to during the escrow.
In some states, that is required.
Most lenders also will ask for such information before granting mortgages.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
Yes, they are disclosed to lenders in a PUD form. They are also disclosed to members. It is their money paying for it. However, it is not the HOA's responsibility to reveal it to non members. That would be the buyers. The selling member may be responsible for disclosing just like the rules in some states.
It is quite complicated and somewhat gray area in some states. Members should know but the board deals with it. A member can not talk to the attorney for details. It is usually an assigned board officer like the president who directly talks to the attorney on the HOa behalf. This saves money and confusion. Although the president can not decide soley to sue. That is a board decision.
Even the biggest corporations in the world must disclose lawsuits, losses, or other serious issues to their stock holders. It is sent out annually to them. However, the stockholder does not have to disclose why they sold their stock to the buyer. The buyer should do their own research as it is most likely public notice when a lawsuit is filed or decided. The judge can decide what details are public or private. Settled out of court agreemenents are seldom revealed the terms.
It is quite complicated and somewhat gray area in some states. Members should know but the board deals with it. A member can not talk to the attorney for details. It is usually an assigned board officer like the president who directly talks to the attorney on the HOa behalf. This saves money and confusion. Although the president can not decide soley to sue. That is a board decision.
Even the biggest corporations in the world must disclose lawsuits, losses, or other serious issues to their stock holders. It is sent out annually to them. However, the stockholder does not have to disclose why they sold their stock to the buyer. The buyer should do their own research as it is most likely public notice when a lawsuit is filed or decided. The judge can decide what details are public or private. Settled out of court agreemenents are seldom revealed the terms.
Former HOA President
RichardP13 (California)
Posts: 1,767
Posts: 1,767
Posted:
Quote:
Posted By MelissaP1 on 07/24/2014 5:38 PM
Yes, they are disclosed to lenders in a PUD form. They are also disclosed to members. It is their money paying for it. However, it is not the HOA's responsibility to reveal it to non members. That would be the buyers. The selling member may be responsible for disclosing just like the rules in some states.
It is quite complicated and somewhat gray area in some states. Members should know but the board deals with it. A member can not talk to the attorney for details. It is usually an assigned board officer like the president who directly talks to the attorney on the HOa behalf. This saves money and confusion. Although the president can not decide soley to sue. That is a board decision.
Even the biggest corporations in the world must disclose lawsuits, losses, or other serious issues to their stock holders. It is sent out annually to them. However, the stockholder does not have to disclose why they sold their stock to the buyer. The buyer should do their own research as it is most likely public notice when a lawsuit is filed or decided. The judge can decide what details are public or private. Settled out of court agreemenents are seldom revealed the terms.
Yes, they are disclosed to lenders in a PUD form. They are also disclosed to members. It is their money paying for it. However, it is not the HOA's responsibility to reveal it to non members. That would be the buyers. The selling member may be responsible for disclosing just like the rules in some states.
It is quite complicated and somewhat gray area in some states. Members should know but the board deals with it. A member can not talk to the attorney for details. It is usually an assigned board officer like the president who directly talks to the attorney on the HOa behalf. This saves money and confusion. Although the president can not decide soley to sue. That is a board decision.
Even the biggest corporations in the world must disclose lawsuits, losses, or other serious issues to their stock holders. It is sent out annually to them. However, the stockholder does not have to disclose why they sold their stock to the buyer. The buyer should do their own research as it is most likely public notice when a lawsuit is filed or decided. The judge can decide what details are public or private. Settled out of court agreemenents are seldom revealed the terms.
You are wrong, wrong and then wrong@!!
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Good grief, Melissa. Sometimes it's better not to reply to posters especially when they are not in AL and your replies stray from the questions asked.
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Betty,
I did a little more research and, per HUD Condominium Approval and Processing guide pending litigation must be disclosed to lenders so the lender may determine if the condominium project is HUD approved. Although single family homes are not required to provide this information, lenders seem to treat every development the same and refusing to provide the information may result in a loan being denied. If it can be proven that the sale failed because the Association didn't release information, then the owner may have cause to seek damages from the Association.
Here is the language in that guide:
The project submission documentation must include information regarding pending litigation.
Pending litigation does not include routine foreclosure actions by mortgagees to obtain rights to a specific unit. Projects containing rent stabilization or affordable housing units must be processed under the HRAP option. A signed and dated explanation addressing each item addressed below must be provided by the attorney representing the builder, developer, sponsor, homeowners association or management company. The following items should be considered:
What is the reason(s) for the pending litigation;
What is the anticipated settlement / judgment date, if any;
If applicable, is there sufficient insurance coverage to pay out a settlement / judgment without affecting the financial stability of the project;
Could the legal action impact the future solvency of the HOA (if so, how);
Could the ability for homeowners to transfer title be affected (if so, how);
and Could the action impact the homeowner’s rights?
Lenders request this information in their Planned Unit Development (PUD) Disclosure questionnaire which is typically sent directly to the Association to complete.
I did a little more research and, per HUD Condominium Approval and Processing guide pending litigation must be disclosed to lenders so the lender may determine if the condominium project is HUD approved. Although single family homes are not required to provide this information, lenders seem to treat every development the same and refusing to provide the information may result in a loan being denied. If it can be proven that the sale failed because the Association didn't release information, then the owner may have cause to seek damages from the Association.
Here is the language in that guide:
The project submission documentation must include information regarding pending litigation.
Pending litigation does not include routine foreclosure actions by mortgagees to obtain rights to a specific unit. Projects containing rent stabilization or affordable housing units must be processed under the HRAP option. A signed and dated explanation addressing each item addressed below must be provided by the attorney representing the builder, developer, sponsor, homeowners association or management company. The following items should be considered:
What is the reason(s) for the pending litigation;
What is the anticipated settlement / judgment date, if any;
If applicable, is there sufficient insurance coverage to pay out a settlement / judgment without affecting the financial stability of the project;
Could the legal action impact the future solvency of the HOA (if so, how);
Could the ability for homeowners to transfer title be affected (if so, how);
and Could the action impact the homeowner’s rights?
Lenders request this information in their Planned Unit Development (PUD) Disclosure questionnaire which is typically sent directly to the Association to complete.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I have personally filled out several PUD forms and it is disclosed on there the number of liens, foreclosures, and lawsuits to lenders who use this form.
I did NOT say I agreed with this situation of not revealing to potential buyer. I personally believe in revealing this information and would if that were the case with my HOA. I feel the buyer should know how our HOA operates in pursuing debts. If they file lawsuits instead of liens, that is something that should be brought up.
However, my personal opinion matters squat. The reality is that the HOA does not have to reveal information to a potential buyer. Not even the rules or financials. Yes, HOA's CAN indeed do this IF they choose and want to. It may be a good business practice for some. It's just NOT a requirement for the HOA to be involved other than the PUD form in a home's sale. It is between the owner/seller and the Buyer. Many states require the SELLER to disclose HOA information. It's a private contract between the two.
Keep in mind that CC&R's and Articles of Incorporation are PUBLIC documents. Since they are PUBLIC it is usually NOT anyone's else's responsibility to provide. It is viewed as the "buyer's responsibility to be informed". Do I agree with this? No. That is why I do like the states that do require the seller to provide this information. Unfortunately, it is usually on the day of closing while your signing all the paperwork and spent the day packing/moving.
So show me where it is the HOA's responsibility to inform complete strangers HOA information... Until then, it is the buyer/seller agreement that does.
I did NOT say I agreed with this situation of not revealing to potential buyer. I personally believe in revealing this information and would if that were the case with my HOA. I feel the buyer should know how our HOA operates in pursuing debts. If they file lawsuits instead of liens, that is something that should be brought up.
However, my personal opinion matters squat. The reality is that the HOA does not have to reveal information to a potential buyer. Not even the rules or financials. Yes, HOA's CAN indeed do this IF they choose and want to. It may be a good business practice for some. It's just NOT a requirement for the HOA to be involved other than the PUD form in a home's sale. It is between the owner/seller and the Buyer. Many states require the SELLER to disclose HOA information. It's a private contract between the two.
Keep in mind that CC&R's and Articles of Incorporation are PUBLIC documents. Since they are PUBLIC it is usually NOT anyone's else's responsibility to provide. It is viewed as the "buyer's responsibility to be informed". Do I agree with this? No. That is why I do like the states that do require the seller to provide this information. Unfortunately, it is usually on the day of closing while your signing all the paperwork and spent the day packing/moving.
So show me where it is the HOA's responsibility to inform complete strangers HOA information... Until then, it is the buyer/seller agreement that does.
Former HOA President
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Quote:
Posted By MelissaP1 on 07/24/2014 7:20 PM
The reality is that the HOA does not have to reveal information to a potential buyer. Not even the rules or financials. Yes, HOA's CAN indeed do this IF they choose and want to. It may be a good business practice for some. It's just NOT a requirement for the HOA to be involved other than the PUD form in a home's sale. It is between the owner/seller and the Buyer. Many states require the SELLER to disclose HOA information. It's a private contract between the two.
The reality is that the HOA does not have to reveal information to a potential buyer. Not even the rules or financials. Yes, HOA's CAN indeed do this IF they choose and want to. It may be a good business practice for some. It's just NOT a requirement for the HOA to be involved other than the PUD form in a home's sale. It is between the owner/seller and the Buyer. Many states require the SELLER to disclose HOA information. It's a private contract between the two.
Melissa,
Yes and No. I agree that it's technically not a requirement for the Association to provide information to a potential buyer. However, as you pointed out, since many States due require that HOA information is disclosed by the Seller and the seller has to get this information from the HOA to disclose it, it becomes an issue of semantics.
As I said, you would be technically correct that this info is not being directly provided to the buyer. However, the Association wouldn't be putting this information together for the seller unless the buyer was requesting it.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
This is the one area that I do believe that people should go to their legislature about. The responsibility of who is responsible for revealing the information to a buyer. Many states make it the seller's responsibility to provide certain documents at/by closing. However, many more states consider the information in the PUBLIC domain and the potential buyer's responsibility to be "informed" prior to purchasing.
My personal opinion is that a good Realtor would tell their client that the property is in a HOA. They then could obtain the information from the courthouse or seller prior to closing. In a "Perfect world" that would be my first starting point in being informed.
I was lucky from the many posters I've seen on here. My Realtor worked as a "Buyer's agent". She let me know it was an HOA. She did not know the dues amount though. The lender when they were approving and even at pre-approval for my property informed me it was an HOA. They had the dues payments factored into my debt load. They even discussed with me that I could afford a home worth about 20 - 30K MORE if I skipped buying a house in a HOA. The dues amounts instead could have gone for a higher loan amount instead. I choose the HOA home because of the benefits of pool access and lawncare.
It would be great if lenders who do have this information provided to them from the HOA, to reveal it to potential buyers. However, this information is CONFIDENTIAL between the HOA and the lender. Most buyers who get loans that have the PUD form never know the HOA even is involved. I know I did not when I bought. It was when I was president and responsible for filling out the form I learned.
Lawsuit disclosure depends on many factors. Is it a normal practice of the HOA to sue a violator? Is the HOA being sued? There are many reasons why a HOA is involved in lawsuits. We had construction issues with our Masonite siding. There was a class lawsuit for that for awhile. If we joined that class action lawsuit, that would fall under the "lawsuit disclosure". Is that a bad thing or a good thing? Lawsuits could be either...
My personal opinion is that a good Realtor would tell their client that the property is in a HOA. They then could obtain the information from the courthouse or seller prior to closing. In a "Perfect world" that would be my first starting point in being informed.
I was lucky from the many posters I've seen on here. My Realtor worked as a "Buyer's agent". She let me know it was an HOA. She did not know the dues amount though. The lender when they were approving and even at pre-approval for my property informed me it was an HOA. They had the dues payments factored into my debt load. They even discussed with me that I could afford a home worth about 20 - 30K MORE if I skipped buying a house in a HOA. The dues amounts instead could have gone for a higher loan amount instead. I choose the HOA home because of the benefits of pool access and lawncare.
It would be great if lenders who do have this information provided to them from the HOA, to reveal it to potential buyers. However, this information is CONFIDENTIAL between the HOA and the lender. Most buyers who get loans that have the PUD form never know the HOA even is involved. I know I did not when I bought. It was when I was president and responsible for filling out the form I learned.
Lawsuit disclosure depends on many factors. Is it a normal practice of the HOA to sue a violator? Is the HOA being sued? There are many reasons why a HOA is involved in lawsuits. We had construction issues with our Masonite siding. There was a class lawsuit for that for awhile. If we joined that class action lawsuit, that would fall under the "lawsuit disclosure". Is that a bad thing or a good thing? Lawsuits could be either...
Former HOA President
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Quote:
Posted By MelissaP1 on 07/24/2014 7:53 PM
It would be great if lenders who do have this information provided to them from the HOA, to reveal it to potential buyers. However, this information is CONFIDENTIAL between the HOA and the lender.
It would be great if lenders who do have this information provided to them from the HOA, to reveal it to potential buyers. However, this information is CONFIDENTIAL between the HOA and the lender.
I have filled out numerous of those PUD questionnaires as well. No where has any of them ever said that the information was confidential.
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Melissa, does your state have any disclosure requirements? Any at a lll? From whom to whom? As a former HOA prez, you would have known even if you're no longer up to date.
RichardP13 (California)
Posts: 1,767
Posts: 1,767
Posted:
Quote:
Posted By MelissaP1 on 07/24/2014 7:53 PM
This is the one area that I do believe that people should go to their legislature about. The responsibility of who is responsible for revealing the information to a buyer. Many states make it the seller's responsibility to provide certain documents at/by closing. However, many more states consider the information in the PUBLIC domain and the potential buyer's responsibility to be "informed" prior to purchasing.
My personal opinion is that a good Realtor would tell their client that the property is in a HOA. They then could obtain the information from the courthouse or seller prior to closing. In a "Perfect world" that would be my first starting point in being informed.
I was lucky from the many posters I've seen on here. My Realtor worked as a "Buyer's agent". She let me know it was an HOA. She did not know the dues amount though. The lender when they were approving and even at pre-approval for my property informed me it was an HOA. They had the dues payments factored into my debt load. They even discussed with me that I could afford a home worth about 20 - 30K MORE if I skipped buying a house in a HOA. The dues amounts instead could have gone for a higher loan amount instead. I choose the HOA home because of the benefits of pool access and lawncare.
It would be great if lenders who do have this information provided to them from the HOA, to reveal it to potential buyers. However, this information is CONFIDENTIAL between the HOA and the lender. Most buyers who get loans that have the PUD form never know the HOA even is involved. I know I did not when I bought. It was when I was president and responsible for filling out the form I learned.
Lawsuit disclosure depends on many factors. Is it a normal practice of the HOA to sue a violator? Is the HOA being sued? There are many reasons why a HOA is involved in lawsuits. We had construction issues with our Masonite siding. There was a class lawsuit for that for awhile. If we joined that class action lawsuit, that would fall under the "lawsuit disclosure". Is that a bad thing or a good thing? Lawsuits could be either...
This is the one area that I do believe that people should go to their legislature about. The responsibility of who is responsible for revealing the information to a buyer. Many states make it the seller's responsibility to provide certain documents at/by closing. However, many more states consider the information in the PUBLIC domain and the potential buyer's responsibility to be "informed" prior to purchasing.
My personal opinion is that a good Realtor would tell their client that the property is in a HOA. They then could obtain the information from the courthouse or seller prior to closing. In a "Perfect world" that would be my first starting point in being informed.
I was lucky from the many posters I've seen on here. My Realtor worked as a "Buyer's agent". She let me know it was an HOA. She did not know the dues amount though. The lender when they were approving and even at pre-approval for my property informed me it was an HOA. They had the dues payments factored into my debt load. They even discussed with me that I could afford a home worth about 20 - 30K MORE if I skipped buying a house in a HOA. The dues amounts instead could have gone for a higher loan amount instead. I choose the HOA home because of the benefits of pool access and lawncare.
It would be great if lenders who do have this information provided to them from the HOA, to reveal it to potential buyers. However, this information is CONFIDENTIAL between the HOA and the lender. Most buyers who get loans that have the PUD form never know the HOA even is involved. I know I did not when I bought. It was when I was president and responsible for filling out the form I learned.
Lawsuit disclosure depends on many factors. Is it a normal practice of the HOA to sue a violator? Is the HOA being sued? There are many reasons why a HOA is involved in lawsuits. We had construction issues with our Masonite siding. There was a class lawsuit for that for awhile. If we joined that class action lawsuit, that would fall under the "lawsuit disclosure". Is that a bad thing or a good thing? Lawsuits could be either...
FYI, HOA assessments are not factored into the DTI, (Debt to Income)Where do you make up this stuff??
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
When I was pre approved and then approved my loan people did indeed factor in the HOA dues in my debt load. We had a long discussion on this FACT. My loan was a FHA conventional loan. Which would have used the PUD form most likely. Which is probably why my loan people knew the HOA information like they did.
Hence this is why I believe that a realtor or lenders should be the ones responsible for disclosing the existance of an HOA prior to buying. Unfortunately, it is NOT reality. It seems it falls on the seller ONLY if required or asked by the potential buyer.
In regards to the PUD form being confidential... It is part of the closing process paperwork. It is usually signed by the HOA at the closing time. The paper may be in the pile of paperwork but it does not require the buyer to sign it. It is already signed. It was between the lender and HOA. Is it confidential? Yes and no. It was done prior to the buyer purchasing and they are not part of that process. However, it is in the stack of paperwork. Which most likely is just glanced over or given little attention. Who is going read something they do not have to sign? Confidential may be the wrong word but it is also not ponted out.
I was one of those "educated" buyers. It was due to my Realtor, asking questions, and doing my research. My second home was during the bubble bursting time period. It was clear then lenders were NOT educating the buyers any more other than selling them greedy loan packages that benefitted them. I could see how easily it was for people to fall for bad loan packages and glaze over the details. It is indeed different world now when purchasing a home. I still believe the potential buyer is responsible for making an educated decision and gather information. I just also feel that those who can access that information should reveal it. It should not be a 20/20 hindsight deal.
Hence this is why I believe that a realtor or lenders should be the ones responsible for disclosing the existance of an HOA prior to buying. Unfortunately, it is NOT reality. It seems it falls on the seller ONLY if required or asked by the potential buyer.
In regards to the PUD form being confidential... It is part of the closing process paperwork. It is usually signed by the HOA at the closing time. The paper may be in the pile of paperwork but it does not require the buyer to sign it. It is already signed. It was between the lender and HOA. Is it confidential? Yes and no. It was done prior to the buyer purchasing and they are not part of that process. However, it is in the stack of paperwork. Which most likely is just glanced over or given little attention. Who is going read something they do not have to sign? Confidential may be the wrong word but it is also not ponted out.
I was one of those "educated" buyers. It was due to my Realtor, asking questions, and doing my research. My second home was during the bubble bursting time period. It was clear then lenders were NOT educating the buyers any more other than selling them greedy loan packages that benefitted them. I could see how easily it was for people to fall for bad loan packages and glaze over the details. It is indeed different world now when purchasing a home. I still believe the potential buyer is responsible for making an educated decision and gather information. I just also feel that those who can access that information should reveal it. It should not be a 20/20 hindsight deal.
Former HOA President
AlbertN (California)
Posts: 10
Posts: 10
Posted:
(CA) Our Association attorney has recommended that the Association provide the information to the seller. Any packages delivered the seller should have a disclaimer with something like ?the release of this information to a buyer does not establish a contractual agreement with the Association?
As I recall, the Association should avoid getting into a position where it can be sued should a sale fall through. It is the responsibility of the seller to fully disclose.
As I recall, the Association should avoid getting into a position where it can be sued should a sale fall through. It is the responsibility of the seller to fully disclose.
EllieD (Vermont)
Posts: 446
Posts: 446
Posted:
Betty,
Were you asked verbally “any lawsuits” or were you given a form, questionnaire asking that question? And if asked in writing, by whom, and how was the question worded?
Were you asked verbally “any lawsuits” or were you given a form, questionnaire asking that question? And if asked in writing, by whom, and how was the question worded?
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