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What Is An Estoppel Letter? Why You Need One For An Association-Governed Building or Community

By Christopher Carter: Real Estate Broker Associate

November 2, 2023

When selling a Florida house or condominium located in an Association-Governed Community or Building, all parties to the sale need a dependable record of whether or not the selling owner owes any money to the Association or has any Outstanding Rule Violations. Estoppel Letters provide the necessary proof of a selling owner's account status with the Association. Because Association Indebtedness and Rule Violations follow the property, not the owner, they are a critical part of all Florida Real Estate Transactions involving Association-Governed Buildings or Communities.

I am not an attorney. For interpretation and application to specific circumstances of anything you read in this article, you must speak with a Florida-licensed attorney.

Buyers could "inherit" a Debt, Delinquency, or Rule Violation if the seller's Association Account status wasn't verified (and any issues resolved if necessary) before a transfer of ownership. For this discussion, "Association-Governed" means buildings and communities in which owning an individual property carries Mandatory or Automatic Membership in an Association that maintains Common Elements/Areas and manages Shared Finances.

Estoppel Letters are referenced and detailed in Florida's Condominium Act (FS 718.116(8) and the Homeowners Association Act (FS 720.30851).

Amounts shown in Association Estoppel Letters do not include Property Taxes, Insurance, or other recurring costs of ownership. Title companies and attorneys do check for Outstanding Property Tax Balances and Municipal Code Violations, though today's article will only discuss Estoppels related to Condominium and Homeowners Associations.

An Estoppel Letter is requested by the Closing Title company or attorney. Per Florida Statutes, the cost for preparing one is currently capped at $299 with additional charges allowed for Delinquent Accounts and/or Expedited Delivery. Estoppel Letters are a seller's closing cost.

Once the Estoppel has been completed and signed by a Director of the Association (or someone authorized by the Board to prepare them, like the Management Company), the Association is "Estopped" from coming back and saying that the property's owner owes more than what is shown in the Estoppel Letter. In order for the content to coordinate with a sale's closing date, an Estoppel includes the date it was prepared and for how long it is valid.

As we have discussed in other articles, sellers and buyers split Association Assessments according to the closing date. A credit is given back to the seller for Prepaid Quarterly Assessments that extend past the closing date. An Estoppel Letter confirms how far in advance the seller has Paid Scheduled Assessments.

(Scheduled Association Assessments are often called "Dues" or "Fees" by owners.)

Example - a selling owner has already paid the 3rd Quarter (July, August, September) Association Assessment, which has been verified by the Estoppel Letter. For an August 31st closing and ownership transfer, the seller will receive a Reimbursement Credit from the buyer for September's portion of the Prepaid Assessment because starting September 1st, the buyer will be living in the property, not the seller. Only through Estoppel Letters can Prorated Payments like this be accurately calculated and supported for both parties.

Most Estoppel Letters used to verify a selling owner's account status with their residential Owners Association include items such as:

• Date Of Issuance and Fee for preparing it
• Name of the unit or parcel owner
• Subject unit/parcel identification and address
• Name of person requesting it
• Amount and Frequency of Regular Periodic Assessment for this unit or parcel
• Date through which the current Scheduled Assessment has been paid
• Date and amount of next Regular Assessment Due
• Current or Upcoming Special Assessments
• Other Mandatory Fees or Memberships
• Outstanding Unpaid Assessments, Fines, or Interest
• Unresolved Violations of Association Rules & Regulations
• Signature of Association Director or authorized agent who prepared it

Clearly, what is contained in an Association Estoppel Letter must be valid through the sale's closing date. Florida Statutes allow Associations 10 business days to provide them after the request is made by a Closing Title company or attorney. They are usually valid for only 30 days after the Date Of Issuance, so settlement agents can't order them either too early or too close to the closing date.

Real estate attorneys tell us that once an Estoppel Letter has been prepared and accepted in good faith for use in a real estate closing and transfer of ownership, it prevents the Association from collecting amounts that are in excess of what was detailed in the letter.

There we are, a very brief introduction to Estoppel Letters and why they are used. With so many Condominium Buildings and Association-Governed Communities in Florida, thousands of Estoppel Letters are prepared every day. They perform an essential function in the sale of properties throughout our State.

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.

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