Estoppel letters: 5 New provisions
What Brickell sellers and buyers need to know about Estoppel Letters
Most people enter a sale and purchase transaction without knowing the many steps required to close. One of these steps is to request an Estoppel letter from the condominium or homeowners association. You may be thinking… ok…and what’s the big deal about requesting a letter?
The truth is that until now, Realtors and Title agents have long been frustrated by the timing and cost associated with obtaining estoppel letters from HOAs, Condo Associations and Community Association Management Companies (CAMs).
The Governor has signed Estoppel Bill SB 398, which addresses this problem. FINALLY .. New Rules regarding Association Estoppel letters and fees that can be charged.
First let me explain what an Estoppel Letter is. This definition I found at the First International Title website is very clear:
“An estoppel letter is a legal document provided by the seller’s Homeowner’s or Condominium Owner’s Association, outlining the current owner’s financial standing, past due balances, current fees due and lists all future special assessments due”
Needless to say that this documents is a MUST in a real estate transaction to ensure that the property is transferred to the new owner without any pending debt or balance from the previous owner(s).
Unfortunately, most associations were not cooperative regarding this matter, charged ridiculous fees up to $500 to fill out this paper and some times even more if it was requested expedite (meaning faster than whatever time they established to issue the letter).
But things are now changing for them…
According to Blue Coast Title the new provisions include:
1. FEE CAP:
A cap on the allowable fee for an estoppel certificate of $250, with an additional $100 expediting fee (defined as 3 days or less), if applicable. If there is a delinquency, an additional $150 may be charged.
2. WAIVER OF REIMBURSEMENT:
One of the difficulties title agents regularly faced were force waivers of their right to reimbursement for advanced estoppel fees if a given transaction did not close. The new legislation addresses this problem within §718.116(8)(h), F.S., to wit: “The right to reimbursement may not be waived or modified by any contract or agreement. The prevailing party in any action brought to enforce a right of reimbursement shall be awarded damages and all applicable attorney fees and costs.” An identical provision for homeowner’s associations is contained in §720.30851(8), F.S. This provision should allow all title agents to recoup advanced estoppel fees.
3. TIMING:
There are several critical timelines built into the new legislation. They are:
a. RESPONSE: Associations must respond to an estoppel request within 10 days of receipt of the request or waive the right to charge any fee for the preparation of the estoppel.
b. TERM: An estoppel certificate that is sent electronically will be good for 30 days, 35 days for those send by ordinary mail. No longer should an agent be presented with an estoppel good for an unreasonably short period.
4. CONTENT:
The content of an estoppel is now set forth by statute. This will mean that title agents should receive estoppel letters in a uniform format going forward.
5. BULK UNIT PURCHASES:
For bulk purchases, there are new maximum estoppel fees.
