Owners Associations

Owners association disclosure calls to the hotline revolve around two main post-closing issues:

(1) fees for the owners association (e.g. fees are increasing dramatically, the seller concealed a $40,000 special assessment)
and
(2) the rules/management of the owners association (e.g. I can’t park my RV in the driveway, the board enforces nitpicky rules, the manager mismanaged the funds)

Best practices for REALTORS® dealing with owners associations:

Use SCR311 due diligence addendum so the buyer can terminate if fees/rules/management do not meet the buyers desires.
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Use SCR391 that contractually puts the burden of owners association document production on the seller during the due diligence period.

https://screaltors.org/wp-content/uploads/Forms/391.pdf

Use SCR310 Section 16 residential property condition disclosure statement (RPCDS) (first checkbox) to get the RPCDS owners association addendum prior to the offer. The owners association addendum asks all sorts of pertinent owners association questions and the owners association charges questions are broadly written to require the seller to disclose all owners association fees.

The seller disclosure also insulates the REALTORS® and brokerage from successful buyer owners association lawsuits. If the seller makes false answers on the owners association and fees/charges, the buyers can sue the seller for damages (e.g. concealed owners association charge increases, $40,000 concealed special assessment) and the buyers attorney’s fees.

For risk management reasons, REALTORS® should probably never provide owners association documents to buyers such as covenants, conditions, restrictions, bylaws, rules, master deeds, etc. (even if the REALTOR® was at a closing the day before for the next door house and has another seller’s/lawyer’s provided copies because owners association may have voted to change the rules and fees that evening).

Only sellers and lawyers should probably provide owners association documents to the buyers. The cost to obtain information on the owners association is a buyer’s transaction cost in SCR310 and seller can agree to pay $ __________ or __% price of the buyer’s transaction costs.

https://www.scstatehouse.gov/sess122_2017-2018/prever/3886_20170419.htm

Posted by : Byron King on 9/21/18 (This information is only accurate as of 9/21/18. You must contact SCR for updates and changes to this information after 9/21/18 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org)