HOA BOARDS INTERVIEWING PROSPECTiVE BUYERS

The only times I've heard of Boards interviewing perspective buyers have been in condominiums (COA vs HOA).

Are you in a COA or HOA?

Everything an Association does can leave them open for legal action. The difference is what type of legal action. Action from the Federal government for failure to maintain stormwater management systems or discrimination are much more sever than actions from individual owners (due to the size of the purse).

If you were interviewing perspective buyers, what questions would you ask?
What would be your exclusion factors to prevent them from buying?

Just received this from our management company when I just asked for their input regarding interviews

"From an operational stand point the only value in an interview is to inform a potential member of the rules and regulations for the Association. The limitations established by the Federal Fair Housing Act creates a large opportunity for the Association to trip and fall into a litigation situation.

So they're toothless. A person could say, "no thank you, I've already read the CC&R's".

I know some Boards in a co-op do this, but haven't heard of a management company doing the same. As others have said, I don't think this is appropriate for the manager to do and he/she should stop it. Did the Board (or a previous one) ask the property manager to do this?

If there's a concern about the new homeowner understanding this community is governed by a HOA, and all the benefits (and drama!) that go along with it, why not require him/her to sign some sort of acknowledgement form to that effect at closing? You may want to ask the association attorney about that first - he/she may be able to help you draft something.)

Even easier, In fact, I believe the Community Association Institute (CAI) has some brochures aimed towards new/potential owners - perhaps you can buy some and put one in a welcome packet (if you have one - if not, create one!) The packet could also include a letter from the board welcoming the new owner and provide basic information (e.g. current budget, upcoming meeting dates and locations, website address, etc.)

That's why I said "run this by the attorney first" - as well as putting something in a welcome packet, which is actually quicker and a little less expensive in my opinion.

As a practical matter, if the homeowner didn't sign, a note to that effect could placed in the property manager's file. If the homeowner then tried to do something and the HOA called him/her on it, and the homeowner squealed about "I didn't know this was a HOA", this form could be used as proof he/she was given notice to that effect. Let the homeowner explain to a judge why it wasn't signed or he/she refused to.

Hello, Kerry.

It is my belief from that a thorough background check would suffice. Turning down a prospective HOA community buyer who is approved by a bank, or seller , could result in civil action against the HOA.

I'm with you, Fred, I think an interview opens an HOA up to all kinds of liability issues as your PM also points out.

I don't even like the idea of a background check.

We have quite a few FL posters and maybe some of the will weigh in.

I think the term "interview" is getting used in the wrong context. It seems this is more or less a "meeting" to review and hand over the rules of the HOA.

This goes back to when it's the "Buyer's responsibility to be informed". I would assume this "meeting/interview" occurs prior to the closing. Which means the owner has an opportunity to NOT close because once the rules are disclosed to them, they may change their mind. They may find out they can't have a boat in their driveway and they own a pontoon boat. This condition of sale allows them to walk away.

I made this mistake once during my Presidency. Rarely does someone call to find out the details of the HOA before closing. This time someone did and asked questions. I told them that the owner owns the house and the lot it sits on. All else is COMMON Property. They have "exclusive use" but the HOA maintains lawn mowing. A lot of people seem to have issue with this NOT actually owning the grass around their home. Even though the yard is the size of a postage stamp and most taken up by driveways.

It turns out the potential buyer balked at this information. They delayed or cancelled the sale of the house. The HOA could have been sued for this. We interfered with the sale of the home. The HOA is NOT responsible for disclosing this information. It is the seller's responsibility in many states. Most owners don't turn over the information till the day of closing. Not enough time to read up.

A sale of a house is a PRIVATE transaction unless the HOA owns the property. Interference that can cause damage to that sale can put the HOA on the hook. They also can't deny the sale based on other federal laws sex, age, and sexual orientation. This interview process is skirting the line on if it's appropriate or not.

Actually, in many States it is the responsibility of the Association to provide this information.
Yes, they provide it through the Seller, but the Association still has to provide it in those States that require disclosure.

For example, VA has a two week time frame for the Association to put together a package which includes an architectural inspection of the property, copies of all governing documents (including all resolutions), minutes of meetings, financials and various other things. Per VA Statute, the Association is bound by law to the information contained within this package. The package is delivered to either the seller, the buyer or one of their representatives based on the direction of the member.

Per VA Statute, the buyer then has three days to review and walk away if desired.

Even if it is the Seller who must deliver the info, that info is put together by the Association.

Many older Covenants/Bylaws had the interview/approve clause in them which was to keep out what are/were considered "undesirables" (their definition). Along with this, they typically had "right of first refusal" which basically said the HOA could refuse to approve your buyer but then they must then buy your unit for the same price. You can imagine the "issues" that arose over this.

While still in many "Covenants", I would hate to go to court to defend such.

Co-Ops are neither Condos nor Townhouses nor Fee Simples.

Co-Ops are nightmares from the 'paperwork' aspect.

In a Co-Op one is merely 'purchasing' (actually buying into) a 'right to occupy' situation.

You can NOT sell a Co-Op, merely, with the BOD's permission, remand the right back.

Not 'properly' worded, but the 'jist' is close to the truth.

VOLUMES - LITERALLY

Our documents just require any new Owner or Resident to register with the Secretary.

A few years ago the powers that be made up a rule that all new owners had to come before the Board. I think this was to try to keep undesirables out. But our Owner who is a suspected drug dealer came before the Board.

Because our Members have been given incorrect information in the past (I don't know if it was done because of ignorance or out right lies) I am having a difficult time convincing some of our members that the information they received earlier was incorrect. Some members mentioned to me that we had never been allowed to rent our units before. I don't know how many times I have told them that our documents have allowed renting units from the first day the Association was established.

Back to Maryland, in Maryland only Co-ops can interview prospective buyers or tenants. And my understanding is there are 20 or less Co-ops in Maryland. No one is building new ones.
Jeanne

Hi Gertrude
Can you explain how you think you would be able to use this "valuable tool".

Renters are a differnt animal. Our CCRs require leases to be for a term of at least 1 year and require a written acknowledgment by the lessee that they will abide by the covenants and rules. Our Articles give the corporation the power to establish a procedure to approve or disapprove leases, and to establish restrictions and limitations on leasing of residences. After 25 years no such procedures have ever been put into place, so the one-year-minimum rule is the only real restriction we have.

I found this website that has more information on the subject that gives a pretty good summary for Florida. Apparently an HOA can take it upon itself to approve or deny purchasers, but only if such actions are "reasonable" and, as you might imagine, different lawyers have different ideas about what's reasonable. In the end, the only opinion that really matters is the judge and/or jury's.

Yes, you are incorrect.

See § 55-509.5. Contents of association disclosure packet. From that Statute:

An association disclosure packet shall contain the following:

5. The current reserve study report or summary thereof, a statement of the status and amount of any reserve or replacement fund, and any portion of the fund allocated by the board of directors for a specified project;

6. A copy of the association's current budget or a summary thereof prepared by the association, and a copy of its statement of income and expenses or statement of its financial position (balance sheet) for the last fiscal year for which such statement is available, including a statement of the balance due of any outstanding loans of the association;

14. A copy of any approved minutes of the board of directors and association meetings for the six calendar months preceding the request for the disclosure packet;