Early Disclosure
Q: Many homeowners seem to be unaware of the law requiring them to provide disclosure documents to their buyer. Sometimes, it is only a few days before closing when buyers request the resale certificate. As association secretary, I have to get the documents prepared. What can be done to correct this? Whose responsibility is it to comply with the law?
A: For many years the Condominium Act and the Virginia Property Owners Association Act have required disclosure of association information. Several people are responsible for compliance with that law. These are the real estate agents, attorneys and the seller.
A community association has fourteen (14) days to provide a disclosure packet from the time the request is received with a check. Therefore, a seller or his agent must ask the association for the packet as soon as the contract is signed. After receiving the information on dues, rules, the budget and other matters, the buyer must quickly decide whether to cancel the contract based on information contained in the packet. When the packet is requested at the last minute, there is no real opportunity to review the information, so the purpose of disclosure is defeated and both the buyer and seller are put at a great disadvantage. As a result of such delay the buyer is often committed to going through with the deal, even if he or she is unhappy with the contents and facts revealed therein. In essence, the buyer may be forced to give up certain rights because the professionals involved in the sale failed to perform their tasks in a timely manner. In 2002, the Virginia General Assembly passed a new law allowing associations to charge a rush fee not exceeding $25.00 for furnishing the packet within three days or less from the receipt of the request. If special mailing is requested and you wish to accommodate, you may also charge the actual cost you incur to do so.
A prompt request for the disclosure packet will allow the buyer to be fully informed. The packet contains critical financial data, insurance coverage, recorded covenants, architectural guidelines and rules and regulations with which the owner will be expected to comply once he becomes a homeowner. The packet also contains information on reserve funds for repairs and future renovations and a statement as to the existence of any architectural violations existing on the property. This will allow the buyer to decide on the purchase shortly after the contract is signed, rather than a couple of days before closing.
Most settlement attorneys do not receive a sales contract until well after it is signed -- often after the loan is approved. Many settlements do not involve attorneys any more. Aside from the buyer and seller, real estate agents are usually the only people involved at a contract's inception. Agents for buyers of condominiums and other association properties should inform the closing attorneys or settlement agent by providing a copy of the resale documents to them immediately upon receipt.
Further, the law does not require disclosure of potential renovation projects and other capital expenditures unless the board has approved an assessment in excess of the regular assessment. In fact, such items should not be contained in the disclosure documents unless there has been such an approval by the Board, since there are many ways to fund projects besides a special assessment. Therefore, condominium buyers are well advised to ask the Seller about any such potential of which he is aware and/or make a review of certain pertinent condominium records, to be obtained and provided by the Seller, a condition in the sales contract.
A great deal more education of real estate professionals is essential so as to stimulate prompt compliance regarding association disclosure laws. The solution to the disclosure problem lies in educating the public and those involved with residential real estate professionally about the important purposes of these laws, and the possible adverse consequences for buyers and the professionals involved in a transaction.