Deed problems

A friend and neighbor is selling her house in our HOA. She's been busy running around trying to get her ducks lined up for the closing tomorrow. She paid a visit this morning to the title company that's handling the sale and purchase of the home. Along with the deed prepared for signatures tomorrow, she saw a document titled, "Certificate of Approval" on the title agent's desk. It says, substantially, the following:


There are a few problems here.

First, my HOA (ABC) does not and never has required any sort of "approval" to buy or sell a home here. There is nothing, nada, zilch in the governing documents that authorizes any kind of approval process whatsoever.

Second, the referenced Book and Page in the county's Official Records point to the CC&Rs of A COMPLETELY DIFFERENT HOA in the county.

Third, the board never authorized Fred Flintstone, our assigned CAM, to sign anything at all on its behalf (I read our contract with the management company carefully, more than once).

Then we discovered that two other homes have been sold here since 1 January and those deeds, recorded with the county, ALSO HAVE executed and notarized "Certificate of Approval" pages filed right along with them.

My questions:

Might this be fraud? GHI Property Management is billing sellers $175 for these bogus certificates. $100 Resale Application Fee along with a $75 processing fee which my neighbor is refusing to pay. If her closing is held up by this at all I think she may have a good case against the HOA and the management company for (possibly) Fraud, Unlawful Restraint on Alienation, Tortious Interference, and a violation of the False Statements statute (she'd obviously need to talk to an attorney about that). Her title agent today told her the problem would be taken care of, but we've heard that before.

Could the 2 deeds already recorded with the county be considered "clouded titles"? Anyone reading them could get the impression that if the transfer was "approved" that it might also have been "not approved". Furthermore, the Book and Page in the county's official records points to another HOA's recorded CC&Rs, not our own. Furthermore, the CoA says we're a Condominium association and we are most definitely NOT a condominium.

We just hired GHI Property Management in January and this isn't the first problem we've had with them and the CAM. Many homeowners are already itching to get rid of them.

Anyone else see any red flags here to be concerned about? Some of us are thinking about, at the very least, a Cease & Desist letter be sent by certified mail to the management company with regard to any future "CERTIFICATE OF APPROVAL" deed adendums.

(OK I hope this shohws up properly formatted / fingers crossed)

Our management company has filed boiler plate documents on the HOA's behalf that refer to other HOA's. It was an honest mistake by the MC.

With that in mind it is very normal for mortgage companies to engage an HOA. They may want copies of covenants, by-laws, etc. They may want financial statements, knowledge of any loans payable by the HOA, if a prospective seller owes any money to the HOA, or if the HOA has any pending litigation. The MC has every right to charge for these document production services and perhaps there final "authorization to sell" is just their way of saying the property is free an clear of any liability to the HOA? I'm just spit-balling here.

It's definitely worth a call to the MC to sort through it though.

Title companies would routinely want in writing that a house was current on dues and able to be sold. As treasurer, I would sign off on this. Sometimes in writing, but usually a email sufficed.

When one buys a house/unit in an association it is critical that they get a "letter/Estoppel Certificate/whatever that says there are no unpaid dues, fines, existing violation notices, agreement there is no outstanding issues like a new owner will do so and so, etc. with the association. One needs to assure their house/unit is "free and clear". Quite often, and in our case, this document comes from the PM.

I do agree with the OP that such could have been worded better, but it is what it is.

I've seen it with my own 2 eyes and I've read our governing documents carefully. There's nothing that would require a COA. Why should anyone have to pay for an approval that was never given because it wasn't needed?

I heard today that the MC has agreed, in writing, to stop preparing bogus COAs. The COAs that they were doing were completely improper. I'd go with the sloppy defense if it weren't for the fact that the CAM was told last month after the first one appeared in the county's reords to stop misrepresenting the authority by which such CoAs were being issued. Then it happened again, and again the CAM said he would "take care of it". It's still happening. My neighbor put her foot down with the title company yesterday and that's what resulted in the written agreement from the MC to stop doing it.

They've invented a superfluous document for the sole purpose of enriching themselves based on false statements. I have no doubt associations that require pre-approval of a sale want to have the final say before a CoA is issued. All of the ones I know of have that requirement for approval in their CC&Rs. The MC is representing that sales here need to be pre-approved and charging people to process the applications whih aren't needed. Sorry, I don't think that's OK.

At least they've agreed to discontinue the practice.

The form you say the management company "invented" is used in a number of condos in Florida. I also believe they are within their power to do.

I have worked in the mortgage industry and when considering debt to income, association dues were not part of the equation for a number of reason, mainly due to inaccurate information.

Detached homes more often than not will have much lower dues than condos. You could buy a condo for $100K and payments for mortgage, property tax and insurance for $1500.00 monthly, yet have assessments of $500 or more monthly. How do you know if the buyer has a history of making those HOA payments, because the lender says so. No one from the HOA ever sees the buyers credit score and/or credit history. Look at someone's HUD-1 and see what is charged for a credit report. Maybe if an HOA reviews a buyers credit worthiness, delinquencies might not be so high.

The problem I see with the OP's example is that it doesn't include all the statutory requirements for an estoppel. A couple of years ago the leg. specifically laid out what's required (per 720.30851):

(1) An estoppel certificate may be completed by any board member, authorized agent, or authorized representative of the association, including any authorized agent, authorized representative, or employee of a management company authorized to complete this form on behalf of the board or association. The estoppel certificate must contain all of the following information and must be substantially in the following form:
(a) Date of issuance:
(b) Name(s) of the parcel owner(s) as reflected in the books and records of the association:
(c) Parcel designation and address:
(d) Parking or garage space number, as reflected in the books and records of the association:
(e) Attorney’s name and contact information if the account is delinquent and has been turned over to an attorney for collection. No fee may be charged for this information.
(f) Fee for the preparation and delivery of the estoppel certificate:
(g) Name of the requestor:
(h) Assessment information and other information:

ASSESSMENT INFORMATION:

1. The regular periodic assessment levied against the parcel is $ per (insert frequency of payment) .
2. The regular periodic assessment is paid through (insert date paid through) .
3. The next installment of the regular periodic assessment is due (insert due date) in the amount of $ .
4. An itemized list of all assessments, special assessments, and other moneys owed on the date of issuance to the association by the parcel owner for a specific parcel is provided.
5. An itemized list of any additional assessments, special assessments, and other moneys that are scheduled to become due for each day after the date of issuance for the effective period of the estoppel certificate is provided. In calculating the amounts that are scheduled to become due, the association may assume that any delinquent amounts will remain delinquent during the effective period of the estoppel certificate.

OTHER INFORMATION:

6. Is there a capital contribution fee, resale fee, transfer fee, or other fee due? (Yes) (No) . If yes, specify the type and amount of the fee.
7. Is there any open violation of rule or regulation noticed to the parcel owner in the association official records? (Yes) (No) .
8. Do the rules and regulations of the association applicable to the parcel require approval by the board of directors of the association for the transfer of the parcel? (Yes) (No) . If yes, has the board approved the transfer of the parcel? (Yes) (No) .
9. Is there a right of first refusal provided to the members or the association? (Yes) (No) . If yes, have the members or the association exercised that right of first refusal? (Yes) (No) .
10. Provide a list of, and contact information for, all other associations of which the parcel is a member.
11. Provide contact information for all insurance maintained by the association.
12. Provide the signature of an officer or authorized agent of the association.

As far as the charge for the estoppel is concerned, that is also set by statute (due to the fact that, primarily in south Florida, some MCs were charging $500 and more per estoppel they completed.

The fees allowed are:

(6) An association or its authorized agent may charge a reasonable fee for the preparation and delivery of an estoppel certificate, which may not exceed $250, if, on the date the certificate is issued, no delinquent amounts are owed to the association for the applicable parcel. If an estoppel certificate is requested on an expedited basis and delivered within 3 business days after the request, the association may charge an additional fee of $100. If a delinquent amount is owed to the association for the applicable parcel, an additional fee for the estoppel certificate may not exceed $150.

Therefore, the theoretical maximum fee is $500. In reality, the fee is going to be either $250 (or less) or $400 (or less) if there is a balance outstanding.

What does an estoppel letter have to do with anything? There was an estoppel letter in my neighbor's case. She wasn't delinquent on any payment and there were no outstanding violations. That has nothing to do with any imaginary "Certificate of Approval" supposedly "required" by the HOA.

That would make sense. In our case there is no right of first refusal, there is no approval committee, and we don't do background or credit checks. There's nothing in our documents that give the association or its board the authority to implement any of that. There have been on-and-off discussions over the last few years about the desirability of something like that, but as of right now there is nothing.

Now that we have a management company those things, mainly the right of first refusal, would be more palatable than having the self-managed HOA take all that on. But the new management co. can't invent those approval requirements out of thin air and cite another HOA's recorded CC&Rs as justification.

Anyway, the MC has seen the light and is no longer charging buyers for a "Certificate of Approval", so we're good for now. Thanks for your comment, Ed.