By: Marilyn E. Tomei, Assistant Legal Counsel
Residents of condominium/townhouse communities and some subdivisions often must join the community's homeowners' association and pay association dues and assessments. Because these funds are used for critical services which benefit all owners, (garbage collection, maintenance of common areas, and water and other utilities), the association must ensure that the dues and assessments are paid by its members. Usually, unpaid fees become a lien on the resident's property. Such a lien can attach to and be enforceable against the property before it appears on the public record, and it may not be detected in the standard title search.
In the standard form offer to purchase and contract, the seller warrants that the property is free and clear of all liens except those specifically noted in the contract. This warranty would include a lien for unpaid homeowner dues or assessments.
If unpaid dues and assessments are not discovered before the property is sold, the new owner may be left to collect from a seller who has moved to another city or state. Therefore, real estate agents in the transaction should inquire into and report on the status of dues and assessments before closing.
If you are the listing agent, question the seller about whether association fees are charged, and if so, about the seller's payment history. Determine who manages the association and collects dues and assessments, and then contact this manager to confirm the status of the seller's account. If you are the selling agent, question the listing agent on these points. If his answers are not satisfactory, conduct your own investigation of the status of the seller's payment by contacting the association manager.
If you, as an agent, determine that the seller's association dues/assessments are not current, immediately alert the parties, the closing attorney and the buyer's lender. Encourage the parties to resolve the issue of payment before or at closing. If the outstanding fees will not be paid by closing, the parties must execute a written amendment to the contract providing that the outstanding charges and lien will be assumed by the buyer, or otherwise providing for their payment. The closing attorney should draft this document and have the parties sign it at or before closing.
Caveat
The listing agent should always inquire into and report on the status of homeowner dues and assessments on property to be sold. If there are unpaid amounts, the agent must determine before closing how or whether the liens will be paid.