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New Year "No Charge" Condo And HOA Estoppel Letters Will Be Changing

By Christopher Carter - Real Estate Broker Associate

January 11, 2024

When selling a Florida residential condominium unit or a house in an HOA-Governed Community, an Estoppel Letter is required before closing to verify any Outstanding Debts or Violations on file with the Owners Association. They are usually prepared by the Property Manager or Management Company on behalf of the Association, then sent to the Closing Attorney or Title Company. Any Balances due are payable either before Closing or as a Seller Cost on the Settlement Statement.

Debts and Rule Violations to Owners Associations attach to the property not the owner, so they have to be addressed before the property is sold to a new owner. Fees charged for preparing an Estoppel Letter are Seller Closing Costs because sellers are responsible for providing "clean" transfer of ownership.

When a Property Manager works directly for the Association (in some condo buildings rather than HOAs), Estoppel Preparation Fees are paid to the Association. However, when an Association Board (COA or HOA) contracts with a licensed company to provide Property Management Services, Fees paid by selling owners for preparing Estoppel Letters are usually kept by the Management Company, not the Association. This is in addition to the Regular Fees charged under the Company's Annual Management Services Contract with the Association.

This recent article gives a brief outline and introduction to Association Estoppels. For some background before today's discussion, I suggest you take a look: What is an Estoppel Letter - and why would you need one? (thefloridarealestateblog.com)

Recently, a Florida Senate Bill was introduced which (if passed into State law) will prohibit Associations and Management Companies from charging owners for Estoppel Letters. SB-278 applies to Condominium, Cooperative, and Homeowners Residential Associations. It will be discussed, debated, and voted on during the current 2024 Legislative Session which runs through March 8th, 2024.

Here are a few discussion points:
• One of the important obligations of a Residential Owners Association is to facilitate the efficient Legal Transfer of Individual Property Ownership within the Association-Governed Building or Community.
• Management companies keep up-to-date Records of the Financial Accounts and any Rule Violations for each individual property in the Associations they manage.
• Preparing an Estoppel Letter involves accurately transferring a selling owner's account information into a template document when a request comes in from a Closing Attorney or Title Company.
• Managers and Management Companies work for the Association, serving as paid Administrative Assistants to the Board of Directors.
• Because charging a Separate Fee for preparing Estoppel Letters is currently allowed, most management companies and Associations charge the maximum per Florida Statutes which is now around $300 each, with additional charges allowed for expedited delivery or accounts with Violations or Delinquencies.
• Being a required component of all property sales in Condominium Buildings and Association-Governed Communities, should preparing Estoppel Letters present an Additional Profit Opportunity and Revenue Stream for an Association or Management Company? Should preparing them be included in an Onsite Manager's normal duties or in the stated services a Management Company provides under contract to Associations instead of an Additional Fee charged to each selling owner? Legislative Session Debate may answer these questions.
• If Management Companies are concerned about losing Individual Estoppel Letter Fees under SB-278, they may increase Annual Management Contract Charges to offset any Perceived or Expected Revenue Loss. Owners might prefer to absorb a reasonable increase in Budgeted Professional Services Fees to the entire Association instead of being charged separately every time an individual property is sold. Again, we will have to wait and see.

Whether you are for or against removing all money charges for preparing an Association Estoppel Letter, contact your Elected Senators and Representatives (along with your Board and Management Company) to let them know your thoughts.

Will SB-278 become Florida Law? No one knows at this point. The Bill's merits and shortfalls have to be debated in the upcoming Legislative Session. Stay tuned in March for the outcome...

Editor's Note: Christopher Carter is NOT an attorney. He does not give legal advice. For interpretation and application to specific circumstances of anything you read in this article, you must speak with a Florida-Licensed attorney.

Have a question or comment about anything you see here, if so, visit: www.TheFloridaRealEstateBlog.com

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