If you are buying, selling or refinancing a home that is governed by a homeowner's association, you may need to approach the HOA for an estoppel letter. This letter certifies the total debt owed to the HOA by the current homeowner and protects against undisclosed financial obligations to the HOA left by the previous homeowner. A real estate attorney can assure that your estoppel letter meets your needs.
What is an Estoppel Letter?
Estoppel, as a legal concept, means someone certifies that certain facts are correct as of a specified date. The HOA estoppel letter certifies how much the current homeowner owes to the HOA in fees and other charges, as of the date specified in the letter. Financial obligations owed to an HOA can include past-due debt, monthly maintenance fees, assessments for repairs or special projects, late fees, fines and interest. The estoppel letter is legally binding. The HOA cannot add newly discovered debts to the estoppel letter after it has been submitted; what you read is what you get. The financial obligation often is included in negotiations to determine closing costs for the sale of a home.
How Do You Make an Estoppel Request?
The HOA by-laws should include rules for submitting and responding to requests for estoppel letters. An HOA might use a standard request form, either a paper or online form, or require a written request for the letter. Generally, you'll need to provide the the buyer’s name and the closing date of the sale or refinance. Rules often require the HOA to provide the estoppel letter within a certain period, such as not more than 10 days after receipt of a written request. Rules also prescribe the maximum amount the HOA may charge for preparing an estoppel letter. The HOAs usually require payment of the fee before an estoppel letter is provided.
What Goes Into an HOA Estoppel Letter?
Estoppel letters vary from HOA to HOA but they generally include the HOA name, homeowner name, property address and the total financial obligation the current owner owes to the HOA. The total amount owed might include calculations of monthly fees up to the future closing date of the sale. The letter may also include instructions on how to make payment, if anything is owed, to the HOA and the signatures of the authorized HOA agent. Attachments sent with the estoppel letter might include the HOA’s schedule of fees and assessments, the payment ledger for the property in question and information about liens or unresolved violations by the current homeowner.
Understanding Estoppel Real Estate State Laws
Sellers and buyers of homes are “jointly and severally” responsible for the financial obligations owed to the HOA, with some exceptions provided for under state laws. For instance, Florida’s HOA statutes limit how far back an HOA may go to pass along unpaid financial obligations to a new homeowner. Your state’s statutes might address the question of financial liability for unpaid debt when an HOA takes ownership of a home because of a lien foreclosure. Your real estate attorney can determine which HOA statutes apply to your situation.
Gail Sessoms, a grant writer and nonprofit consultant, writes about nonprofit, small business and personal finance issues. She volunteers as a court-appointed child advocate, has a background in social services and writes about issues important to families. Sessoms holds a Bachelor of Arts degree in liberal studies.