PM says we can't do our own closing paperwork to make $400/home, contract says other wise

I believe it will boil down to who has the information and, in your case, what the contract says.

If you don't have direct access to the ledgers, copy of insurance declaration, etc. then you would still have to ask the PM for that information.

Additionally, the Association is still bound to the terms of the contract.

When I served as Treasurer, I handled providing the closing documentation all the time.
It's typically a one page document from the closing company asking for the information.
We did not charge to complete this. It took about 20 minutes when you have all of the information at your fingertips.

We did charge for the disclosure package that was required by Virginia Law.
This was paid for by the member and sent to individuals they identified (typically the Realtor).

IMO and experience, $400 is excessive for the amount of work that needs to be done. While I don't know what your state requires, in my experience it boils down to compiling docs/records already available electronically by systems, filling out a form or 2, verifying violation/compliance status and documenting that, and maybe some other minor things. It chapped my a$$ to cough up $200 to the MC when I sold my prior home, knowing that I was paying for minutes of work ... but that is what the MC contract indicated, so that's what I had to pay. Largely I feel it's a money grab by some MCs. They have and closely hold most of the needed info/records, so the closing package isn't easily generated without their involvement.

That said, the MC contract is what dictates their process, price, and what Board has agreed to on behalf of rest of community. There should be no issue discussing this with the MC and negotiating a lower cost for your homeowners but still a reasonable profit for pthe MC. But it shouldn't be a significant money-maker for the MC simply because owners who sell are forced through a process and MCs see it as a way to get a piece of the pie.

IMO the contract language you copied/pasted, specifically the "upon request" part, is open to interpretation depending on perspective . . .

"Upon request" (as you're interpreting it) could mean "if you ask", meaning one might have/make a choice to ask the MC or not ask them for the docs.
"Upon request" could also mean "when you ask". Since obtaining this closing package is a necessary part of selling a home, then every house that sells will need to ask at some point in time for the package to be prepared, so when it is asked for, it will be prepared ... by the MC.

To your question ... next satep would be to discuss this with your MC. Ask them what is involved. If you think $400 is excessive, then explain that with rationale, and see if they will agree to a lower cost. If they refuse, then you either live with it, or this becomes a topic that continues to generate friction with them and could eventually sour the relationship. My guess is that if it's discussed rationally and fairly with both sides, then a mutual agreement that is fair and reasonable will be reached. IMO, this is something you want the MC to be doing for your HOA since it removes responsibility/work from the Board which is largely why MCs are used in the first place.

Wendy, I agree with you about the contract.

This is a contract between the HOA corporation and the manager. An individual owner does not speak for the HOA corporation. An individual owner does not have a contract with the manager. I agree with WendyM5 that the manager needs permission from the board to do the closing paperwork.

I think this came up here before not long ago, with someone else.

Regarding the next steps: I advise modifying the contract and negotiating a flat fee. At closing the owner pays the fee to the HOA (under the clause in the covenants about individual benefits to an owner being billed to this owner), then the HOA pays the manager for the labor per the manager's monthly billing for services. The new contract should also talk about home sales that fall through. Must the seller pay a second, closing paperwork fee? Some HOAs cut owners a break when this happens.

I advise against volunteers preparing the closing paperwork.

We would make about $4000 per year which according to our tax cpa shouldn't be an issue. We got $10k one year from a grant also not an issue
We can always roll into reserves

Wendy, that dislikes BOD's, is now showing the BOD how to pull a fast one on buyers in her association.

I am all in favor of a "buy in" but it should be made clear that it happens..

I agree with ND and the Johns. That is why pointing out the tax ramifications. This is a profit for profit sake. A HOA can charge for it expenses. It does not need to profit from them.

Please be aware my post pertains to property sales in Chapter 81 and Chapter 82 condominium associations in Texas and not Property Code Section 209 Homeowners Associations. The Legislature placed restrictions on charges during the 2021 Session when properties in a TPC 209 association are sold; I am not conversant with the changes.

We as the MC charge $250.00 to prepare and send the title company what is called the (TREC) Resale Certificate. The $250.00 is charged to the seller as a private transaction between the MC and the seller, the association is not involved and does not set or approve the transaction charge. There are no transfer or other charges imposed by the association on the buyer or seller.

I agree, most of the time it takes only 30-60 minutes to complete the form and assemble the documents which must accompany the Certificate when it is sent to the title company. The documents include the Bylaws, CC&Rs, Rules, Certificate of Incorporation, amendments, and others. In the case of older properties, there may be as many as thirty documents which must be included. The process is more complex if the owner account is not current or there are open compliance issues.

In the past we have provided up to five hours of administrative support to the sale of the property at no additional charge. This has included answering questions from the real estate agents involved, the title company, and occasionally questions from the buyer or seller. The $250.00 has also included completion of questionnaires from lenders and dealing with repairs for which the association is responsible which are requested by the buyer following the buyer's inspection.

We do not charge the association to establish the new account or close the old account in the management systems.

We are evaluating changes to the foregoing, in particular changing the five hours of additional support to a smaller number of hours and charging more per hour when additional support is requested.

Did your survey indicate that generating the package only costs $40, but you're going to charge owners ten times that for them to receive it? Doubtful.

And in regard to a capital contribution (which I'm not really a fan of either but can understand if it exists in the HOA law/documents as allowable) ... it's not six of one, half a dozen of the other (as the saying goes) in your comparison to you hitting owners with a fee on way out because you can't hit them when they come in ... you can't just generate fees that MUST be paid because you say so, and count it as income for the HOA and roll it into reserves. You're generally supposed to collect exactly what is needed to pay for things that the HOA is allowed/responsible for providing, not just charge what you want and whatever is leftover belongs to HOA.

Finally, your statement of "people that move often pay more fees to enjoy common elements that others have contributed to for longer times" ... I'm not sure what this means but I think I understand what you are trying to say; however, your logic is flawed. I don't want to delve too deep, but I liken HOA Reserves to the process of paying into and receiving Social Security (although ordered differently) ... people living presently in the HOA pay money toward future HOA repair/replacement that they may or may not be around at that future time to take advantage of. However, while living in the HOA, they were able to take advantage of the common element in its working/functioning form, so contributing to eventual repair/replacement makes sense. Why should someone who just moves into an HOA be burdened by the full cost of a repair/replacement simply because they moved in an exactly the time the element needed repair/replacement?

So this is the email I got back. Kind of predictable.

That is a misinterpretation of the contract. "Upon request" is not the Boards request. Its the buyer and sellers request and they are responsible for the fee not the association. This is not something that can be negotiated as this service is part of the contract and will need to remain part of XXXX's services. We are not equipped to effectively work with a third party for closings.

The Ironic thing is that this closing paperwork has become so profitable, that they even have software API's written so that the paperwork can be automatically generated when needed.

Of course all surveys are written to elicit the desired answer.

agree that is why we want a 3rd party to do it.
PM said this is non negotiable and the requestor refers to the home owner not the BOD.

hmm, apparently we are at an impasse. I emailed PM back asking if they would like a phone call to discuss.

I also pointed out that if indeed the requestor is the homeowners the contract still allows the requestor to choose who to use.

Let say the HOA BOD just happens to call every for sale sign number and email the seller/realator a weblink to get closing documents. Wonder how that would play out. PM can get upset, but their contract states requestor is not bound to use them.

There is a science behind writing survey questions, although most are either unaware or simply don't care. I wouldn't say that all surveys are written to elicit a desired answer, but the one that Wendy created most definitely was written to steer homeowners the desired way. I'd love to see the rest of the questions.

Would be interesting to see what happens if you give owners the real choices in regard to this.

Survey question could be phrased as follows ... "If given the option to pay for receipt of all documentation needed for closing/transfer of property, which do you most prefer?"
- pay $40 to HOA.
- pay $400 to HOA.
- pay $400 to MC.

Wendy, I'm not sure overall how your Board/HOA relationship is with your MC, but if you're at this point with them about closing documents, I can only imagine that things overall aren't great between all parties and many/most things probably seem challenging and/or confrontational. It doesn't have to be that way.

Sometimes I think I am stirring the pot, like asking for breakdown of these monthly admin fees where they are charging us and 15 other HOA's aproximately $3000 to $4800 in office supplies per year? I'm only spending about $30 in office supplies. And the cost for paper and letters is not included in that. hard to believe that is the real cost. then again sometimes my inquires yield fruit like discovering a $500+ error on postage fees.

We had a great PM for several years, her replacement lasted 2 months, currently dealing with the supervisor to get stuff done. I feel like any company is going to always interpret things to their benefit. I'm not surprised of thier stance. I am surprised they have a contract with grammar errors and Loosey goosey wording that clearly lets the requestor choose whom they want to. They are basically opening the gate and allowing a cash cow to roam the land.

Not my strength at all, but many above say as a non-profit, your assn. may not make policies that provides profits to your assn. You need to charge what is s costs your HOA to do the work.

It's good to see such full replies form ND.

This is not a question to ask owners especially if it's against the law to make a profit! Say, Wendy, what % of the surveys you sent out responded?

this is getting off topic but about 1/3 of the people respond, which is extremely good for our HOA

if you really want to read about non profit income law here you go

Generally speaking, to qualify for an exemption from federal income tax, 60% or more of the
association’s gross income for the taxable year has to be exempt function income.
Exempt function income consists solely of income that is attributable to membership dues, fees, or
assessments of owners of residential units or residential lots.
Additionally, 90% or more of the
association’s expenditures for such taxable year have to be qualifying expenditures.
“Qualifying expenditures” are expenditures by an organization for the acquisition, construction, management,
maintenance, and care of the organization’s association property.”

When I asked our CPA if contributing to reserves was a qualifying expenditure they said yes.

I see the NC Nonprofit Corporation statute says:

" 'Nonprofit corporation' means a corporation intended to have no income or intended to have income none of which is distributable to its members, directors, or officers, except as permitted by... "

So I think Wendy's HOA is still a nonprofit corporation and can enjoy the benefits of being nonprofit, notably as these pertain to tax benefits. The HOA's tax cpa blessed what the corporation is doing. This leaves one problem: Presumably the governing documents permit the charging of this document preparation fee and allow the board to set the fee. The law says the board has to be reasonable when the governing documents give it discretionary authority. So the fee charged here has to be "reasonable." If the HOA has contracted this service out, so that the HOA pays $40 but then the HOA turns around and bills a seller $400, then this is not reasonable. It's dastardly.

The answer to that question is absolutely yes.

However, the question should have been: If the Association collected funds for closing paperwork, would it be taxable or considered an assessment for tax purposes?

Two completely different questions.

That would be way too broad of a statement.

Associations collect funds via many ways:
Assessments
Late Charges
Monetary penalties for infractions of the governing documents
Interest earned in bank accounts
Some will actually invest and receive a return on the investment
Per Wendy, and I expect this is locality dependent, there may be grants.

Associations should only plan a budget on Assessments unless they have historical data to budget in the income from other sources.

It's highway robbery and a bona fide transfer fee, in violation of NC law prohibiting transfer fees.

Wendy, per the NC statute on transfer fees, your HOA can bill for closing paperwork as long as the fee is (a) reasonable and (b) for the preparation of the resale certificate. Your HOA is billing $360 (net) that is // not // for the preparation of the resale certificate but instead, is solely to make a profit.

Your HOA is violating state law. What a disgusting HOA abuse. And you support it.

ummm, well if you bothered to read my posts you'll note that implementing this has not happened yet.

You might want to read § 47F-3-118. Association records. as well as the associated laws dealing with what an HOA can charge for governing documents.

but lets assume you are right. which means our PM has been violating the law and racked up about $20K in closing fees over the last 5 years. What should the board do about it? sue to get the fees back and track down the preivous owners and mail them checks?

so you are saying the BOD should continue to let the PM rack up $4000 in profit/year? Based on my limited research, most BOD's are clueless and do not even realize that PM's are making hand over fist on theses fees which are allowed under § 47F-3-118. Association records.

I' a bit confused, cause other HOA members thought this was awesome that we could stop the PM from using our data to make $4K a year and instead keep it fight inflation, etc.. What are other HOA's doing? They are doing the closign docs for free? surely the PM isn't doing it for free? I know of zero PM's in NC that would do it for free. In fact I could only find one PM that would allow the HOA BOD to do it and they still wanted $100/ closing to update the ownrs name and address. Yeah, that's right $100 to update an address taht takes 10 seconds.

I did. It appears that the max allowed is $200 with an additional $100 if the seller wants the document within 48 hours.


If the company deals in real estate, they would hold a realtors license and I would make a complaint against the license.

If the company is not required to have a license (MC in NC are typically not required to have a license), I would look at terminating the contract for willful violation of NC statutes.
Otherwise, with the MC being the HOAs agent, it's possible that a seller may have grounds for legal action against the Association.