CC&R Acknowledgement Form

Hello,

I'm the bookkeeper for an HOA in the State of Kansas that has a clear restriction on leasing of homes in their CC&R. When title companies contact me for information and status of dues assessments for a particular lot that has a pending sale I always reply with a copy of the CC&R and a specific mention to disclose the leasing restriction to the buyer.

So far, this has worked great and several potential sales have cancelled once they learned of this rule (it's a high demand neighborhood with very low days on market so this isn't considered a hardship to the seller). However, we just had a circumstance where the buyer paid cash and, since there was no mortgage and no accompanying Planned Unit Development rider, he was never informed. On top of that, his realtor assured him that leasing was okay in this HOA. He found a tenant but the HOA is contesting and the house now sits vacant.

All of the drama aside, and I think the buyer may have recourse against the title company and/or Realtor, I've been considering if we could send a CC&R Acknowledgement Form to the title companies and get a signed copy from the buyer when they mail the transfer fee.

Has anyone else addressed this issue and, if so, do you have some sort of form would you mind sharing?

Best,
Jay

This is EXACTLY why I warn HOA's to NOT be responsible for giving these documents. It confuses people and ASSUMES responsibility on multiple parties. The HOA should NOT be providing a copy of the CC&R's nor Articles of Incorporation. They can provide a copy of the By-laws or ACC documents. This is also should only be done with members only NOT potential buyers. In some states it's the requirement of the SELLER to provide these documents. So the HOA could give to the member at time of sale upon request. Let's say the seller contacts the HOA for a copy at sale time instead of before or during.

The CC&R's and Articles of Incorporation documents are considered PUBLIC documents. They are the responsibility of the buyer to "be informed". The HOA, Realtor, Title company, Lawyers, or mortgage company is NOT responsible for providing. As stated before, Sellers/HOA member may be responsible in some states. The CC&R's are available at the local courthouse and the Articles at the State level. By-laws are internal HOA documents but may be on file with the CC&R's.

So I would recommend NOT taking on this responsibility for exactly this situation. A cash sale, tax/bank foreclosure, or odd sales will fall into this grey area or responsibility. Which doesn't excuse one from following the rules. Now I am not saying the HOA can't be "courteous" with providing some information like a brochure etc. Just don't take on the responsibility of document providing to POTENTIAL buyers.

Melissa has strong opinions that I do not believe are shared by most who post here.

This is not about "assuming responsibility" and "confusing people". People are already confused - Otherwise the OP would not have posted. As I have said in a prior post in response to one of Melissa's posts on this topic, taking proactive steps to get a message across may have only limited success, but it does not create an obligation. If there is no legal requirement, then shock of all shocks, there is no legal obligation.

Unfortunately, Melissa's posts on this topic create misdirection and confusion. I believe that you will bett better responses from others.

Let me put it this way... It is publicly available then no one is responsible to provide. It means liabilty is not put on anyone but yourself. Do you want your HOA sued because it did not provide documents it is NOT responsible to provide? The seller is responsible so why should the HOA as a whole be responsible?

Yes I do. Common sense. If something available PUBICLY it is open resource. Like posting a lien or foreclosure in the newspaper. Can not sue for not providing and you not complying.

Take Melissa's advise. Since no one else challenges her, she MUST be right!

There is a DIFFERENCE between Maintenance of documents and providing them. What you quoted says the HOA maintains copies for MEMBERS. Does NOT say "HOA gives documents to POTENTIAL buyers". It means that the HOA provides them to the MEMBERS. I am NOT saying the HOA should not have a copy. I used to bring mine to EVERY meeting a refer to them. My point is that the HOA does NOT provide them outside it's membership.

Let me put this scenario to you. Your state requires the seller to provide CC&R's/By-laws and Articles of Incorporation to be turned over at or just prior to closing. (NOT every state this is required). The HOA member/Seller does NOT do this. The new owner/member violates the painting rule by painting the house "Rainbow". The HOA approaches the new owner with fines/violation notices. The new owner claims "I never was provided the documents. The HOA should have done it (or realtor, mortgage, title... fill in the blank). So because was not provided the documents then I can't be in violation. Thus I am also going to sue the HOA for not providing me the documents.

So now the HOA has to pay for a lawyer to represent them in court. Their defense? They are not required to provide potential buyers the documents. It is the Seller's responsibility. Which the seller could have requested or gotten from the courthouse as they are kept PUBLICLY. States that do NOT require the documents to be provided defense is that they are available to the Public.

In all do you want your HOA sued because your neighbor failed to provide the documents at THEIR closing? Why are YOU now on the hook for someone else failure to follow the requirements. Do you want to be part of a lawsuit which then effects your re-finance rates or loan options?

I am not saying the HOA can't provide the documents. It's probably better to reference where they can be found. Providing the documents can be a charge. Which may upset some people. It also may make it seem the HOA is involved in areas it isn't. Everyone is so paranoid about the HOA getting sued, seems kind of common sense that it puts itself at risk for giving the wrong perception of responsibility.

I would not provide them to the title company unless the title company requested them. It is the buyers responsibility to know what they are buying. If the realtor lies or does not know what he is talking about he or she should be sued. I do believe in providing all requested information but do not think it is the HOA's responsibility to due the buyers due diligence. In my State they are recorded with the County and the title company has access to them as they do all the property records.

There are many realtors who would not agree with a blanket statement like this. Same for lenders, title searchers, etc. If you fully understood the professional responsibilities and liabilities of each of these professions, you would not be making such sweeping remarks.

There have been 5 units sold in our HOA in the last 4 months since I became president. In all cases, the realtor representing the seller requested the governing docs from me. I was happy to provide them because I was able to send them the pdfs via email. It would have been different if I had to print and send them by snail mail. If that was the request, I would reply that all homeowners are provided copies of our docs in their welcome package and that the realtor should get them from the seller.

That's an interesting approach! I'll pass this along.

Whenever a sale happens, 3 potential conflicts arise:
- Seller vs Buyer
- HOA vs Seller
- HOA vs Buyer

These are 3 separate relationships - but there is never an opportunity for all parties to sit at the same table at one time.

The PA statute lays out who needs to disclose what, when the disclosure must take place, and who becomes liable for disclosure failures. Sometimes Buyer, sometimes Seller, and sometimes HOA. For example, if the HOA fails to disclose an existing violation, the HOA can't hold the Buyer accountable for that prior violation. Have to let it go.

We once discovered after issuing the 5407 that the Seller did some cosmetic repairs that hid defects. It was days before closing and we sent a revised 5407. Angry seller demanded an exception. Board said that we would not make a rushed decision. At closing, money was put in escrow pending decision by the Board 3 weeks later on whether the exception would be granted. It wasn't. Without the PA statute, it would have been a mess trying to sort out the competing conflicts.

KS doesn't have such a statute. But they do have Seller's disclosure documents that shifts the burden and potential liability onto the Seller (rather than the HOA). The issue with the KS disclosure is that the wording is - To the best of Seller's knowledge. Which leaves a lot of wiggle room. By publishing a document to the community, it makes things that much harder for the Seller to claim ignorance.

As an HOA, you want as much as the potential conflicts as possible to wind up between Buyer and Seller. A document to all potential Sellers could help push things in that direction.

Please explain.

NpS, I’m not so sure about the realtor. Our current treasurer is a realtor (and the former board president). Once we had a disagreement about something and I made a comment about people knowing the rules and he said “well homeowners are usually so excited about buying a home, they don’t ask about HOAs.” This is a guy who sold homes in our community as well as others that he knew were HOAs because most of the HOAs in this area are also members of a township resident association that represents the area before the city/county zoning board. When he said that, I had to wonder what he was telling his clients – for the most part he’s an honorable guy, but that surprised me.

Hell, I used to think the HOA was some sort of souped up block club that sponsored community cleanup days or holiday decorating contests along with hiring someone to shovel the snow. I was a first time homebuyer and heard a few things about HOAs when I took the first time homebuyer course (6 weeks of education about credit history, closing costs and all that).

After moving in, my education really began when I attended my first board meeting and asked about the association installing more vents on my portion of the roof (per my home inspector’s suggestion). They didn’t have the money at the time and that’s what originally prompted me to join the board so I could keep that on everyone’s radar. Then I started learning about everything else.(in the meantime, a hailstorm resulted in the master insurance company replacing all the roofs with enough vents, so that was that).

During my 10 years on the board, I met plenty of people who found out about the HOA after the fact. For most of them, this wasn’t a big deal, as they knew the HOA did thinks like cut the grass and rake the leaves, so they paid the assessment and went on with their lives. Others bought the homes (we’re a townhouse community) solely to rent them out, and they really didn’t give a flying F about the rules, let alone educate the tenants on what they could and couldn’t do in the community.

Five of my 10 years were as board treasurer and I think there were only TWO occasions where the lender knew who we were. Everyone else, it seemed to be a big surprise, and then they’d do things like put off finalizing any paperwork until they could sell the house for whatever they could get from foreclosing on the owner and maybe we’d get a few months of delinquent assessments. Most times, we got nothing and had to write it off.
I saw these statistics from https://ipropertymanagement.com/hoa-statistics:

347,000 HOAs in this country, comprising 26.6 million households (24% of the country), where an estimated $95.6 billion (with a B) is collected every year in assessments.

That’s a helluva lot of people and money, and considering the number of HOAs and the information banks and mortgage companies have access to, there really isn’t a reason why they can make a few calls and find out if the house or condo is in a HOA community. If they don’t know what they are, they can do some research and find out – and I believe there’s a company that was established to help the banks dig up this information. So the lenders don’t have an excuse. Whether they grab the documents or pass them along to the buyer is another matter.

In the end, I’ve learned no one will care for your home the same way you do, and when people are selling stuff, it’s pretty much every man and woman for him/herself. As long as they get their commission, check for the balance of the sale or whatever, it’s all good for THEM. If you happen to find out about the HOA, how it operates and why you should care, good for you, but they may not necessarily tell you up front. Especially if it may cost them a sale. You’re investing tens of thousands of dollars in your home – you’d better know exactly what you’re getting into. There’s information all over the public library and internet about this stuff, not to mention this website – all you have to do is take a look at it and ask questions. Keep asking before you sign those papers and hand over that check.

All that said, this is why I’m glad our state enacted legislation that requires sellers to provide certain information about the HOA before closing (I think it’s at least 5 days). What we need is more education to encourage to ask about this stuff at the onset. After that, if you don’t read and ask questions, what else can anyone do if you can’t or won’t take steps to protect yourself?

Agreed. It makes sense for an HOA to do what it can to preempt the "I didn't know" - "you should have known" dispute.
Luckily for you in FL and me in PA, the resale disclosure statutes do a nice job of establishing fairly comprehensive standards and obligations for Seller, Buyer, and HOA. Unfortunately for the OP, the state of KS doesn't provide that kind of framework.

Reminds me of the MC we once had. Told us that we should ignore reserves because - No one wants fees to go up and most people don't want to be bothered with something that's 10 years down the road. Got rid of him a couple of years later.

Still friendly with him. But he doesn't say things like that anymore. His attitude has evolved with the times.


Agree. Don't know where we would be if disclosure requirements were not set by statute.