Q&A: Astute buyers request homeowner association documents prior to offer

Question: My homeowners association doesn’t run smoothly. Communicating with the board and management wears me out. I tried to sell my townhouse last year but had a really hard time getting the documents buyers wanted before they would make an offer. It used to be that buyers would ask for these documents after they opened escrow or right before escrow closed, but now they’re asking for these documents before writing an offer. Last year, the board and management company kept giving me the runaround, causing me to lose two prospective sales because of delays in getting documents. Can I do anything to prepare in advance of selling my home beginning next year?

Answer: Smart buyers ask for homeowner association documents before writing an offer. Once signed, that offer becomes the parties’ escrow instructions. And once the contract is accepted and escrow has opened, it could be difficult modifying those instructions. It makes sense that buyers are performing due diligence prior to making offers.

This year, Assembly Bill 2430 regarding transfer disclosures was signed by Gov. Jerry Brown. In part, the bill amends Civil Code sections 4528 and 4530, requiring costs for providing mandated documents be separately stated and billed apart from other charges that are part of a transfer or sales transaction. This bill makes the seller responsible for compensating an association, person or entity that provides these documents.

The seller is required to provide a prospective purchaser with certain current documents the seller possesses, free of charge. In addition, the statute prohibits the seller from giving a prospective purchaser the required documents bundled with other documents.

Civil Code section 4528 provides a sample form to be used for billing and lists the transfer documents required by Civil Code section 4530:

•Age restrictions, if any [Civil Code section 4525(a)(2)]

•Annual budget report/Pro forma, and reserve study [Civil Code sections 5300, 5310, 4525(a)(3)]

•Approved changes to assessments [Civil Code sections 5300, 4525(a)(4), (8)]

•Articles of incorporation or a statement that the association is not incorporated [Civil Code section 4525(a)(1)]

•Assessment and reserve funding disclosure summary [Civil Code sections 5300, 5305, 4525(a)(4)]

•Assessment enforcement policy [Civil Code sections 5310, 4525(a)(4)]

•Bylaws [Civil Code section 4525(a)(1)]

•CC&Rs [Civil Code section 4525(a)(1)]

•Emergency assessment [Civil Code section 4525(a)(4)]

•Financial statement review [Civil Code sections 5305, 4525(a)(3)]

•Insurance summary [Civil Code sections 5300, 5310 and 4525(a)(3)]

•Minutes of regular board meetings conducted over the previous 12 months, if requested [Civil Code section 4525(a)(10)]. Make sure to ask for 24 months.

•Notice(s) of violation [Civil Code sections 5855, 4525(a)(5)]

•Operating rules [Civil Code section 4525(a)(1)]

•Other unpaid obligations of seller [Civil Code sections 5674, 5675, 4525(a)(4)]

•Preliminary list of defects [Civil Code sections 4525(a)(6), 6000, 6100]

•Regular assessment [Civil Code section 4525(a)(4)]

•Rental restrictions, if any [Civil Code section 4525(a)(9)]

•Required statement of fees [Civil Code section 4525]

•Settlement notice regarding common area defects [Civil Code sections 4525(a)(6), (7), 6100]

•Special assessment [Civil Code section 4525(a)(4)]

On written request, and within 10 days of mailing or delivery, the association shall provide the titleholder, or any other recipient so authorized, with a copy of requested documents specified in Civil Code section 4525.

Delivery shall not be withheld for any reason nor be subject to any condition except payment of the authorized fee pursuant to Civil Code section 4530(b).

For purposes of transmission to the buyer, the fee for each document provided to the seller shall be individually itemized in a required statement the seller furnishes to the prospective buyer.

It is the titleholder’s responsibility to compensate the association, person or entity that provides documents required by Civil Code section 4525 to the prospective purchaser.

Buyers should understand they are not limited to these statutory transfer disclosures. In performing due diligence, buyers should ask for whatever they feel is necessary to make an informed decision.

Twelve months of minutes is inadequate especially if any minutes are sparse or in “draft� form or unsigned, or meetings were infrequent. Buyers need a minimum of 24 months of signed minutes.

Buyers should ask to attend at least three board meetings. A board might be on its best behavior for that first meeting, but by the third meeting there might be a different picture of what it’s like in that development.

Walk the grounds during the day and evening, look for items of disrepair, then request the most recent minutes documenting discussion of those items to ensure the board is acting promptly and repair is scheduled.

Titleholders do not need to sell their property to obtain the transfer disclosure documents. As a precautionary measure, owners should request these documents every year. You can protect your home, asset and investment only if you are aware of all proceedings and decisions that potentially affect your property.

Zachary Levine, partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295 or [email protected].