HOA Estoppel Letter: Short Guide for Community Association Board Members
An estoppel letter is a legally binding document that certifies the amount of money a home seller owes to the Homeowners' Association (HOA). Since real estate lingo varies from one state to another, different people use different names to refer to the HOA estoppel letter. Other terms used to refer to a HOA estoppel letter include Estoppel Certificate, HOA Letter, HOA Status Letter, HOA Closing Statement, HOA Certificate, Current Dues letter, and Resale Letter, among others.
If you are a current HOA member and need some guidance on HOA estoppel letters, RealManage has got you covered. In this blog post, we have highlighted the essential aspects of HOA estoppel letters that you should know about, including who provides them, why they are necessary, and what you need to do to ensure that you handle correctly. Read on to find out more.
Who Provides Estoppel Letters?
The seller's Condominium Owners' or Homeowners' Association provides Estoppel letters. For instance, an investor can write your association or your HOA management company requesting an estoppel letter so that they can determine whether the seller has any outstanding balances (recurring payments, legal fees, and violations) owed to your HOA.
Why are HOA Estoppel Letters Necessary?
An estoppel letter is a critical part of the selling or buying of a unit or parcel that is part of the HOA. The letter is part of due diligence when it comes to reviewing a property. For prospective buyers looking to purchase real property that contains rental premises, the HOA letter provides crucial information regarding the landlord-tenant relationship.
Aside from being crucial documents for real property buyers, HOA estoppel letters are an important piece of document for lenders looking to take real property as security. Before closing, HOA or the HOA management company should provide the lender with the HOA Estoppel letter to demonstrate whether the property owner owes any HOA outstanding balances.
How to ensure that Estoppel Letters are Handled Properly
HOAs are obligated by statute to provide HOA Estoppel letter within 15 days after receipt of a written request. The HOA by-laws should contain rules for submitting and responding to request for HOA estoppel letters to ensure that they meet statute requirements.
When creating Estoppel letters, HOA may utilize a standard request form or an online form. Information to include in an estoppel letter include:
- HOA's name and contact information
- Property owner's name and contact information
- Property description and address
- Total financial obligation the current property owner owes the HOA
- The date for which the balance will remain unchanged
- Authorized signature from HOA board member
- Instructions on how to make payment to the HOA
Note that HOA cannot add newly discovered debts to an Estoppel letter that is, submitted already. The financial obligation is inclusive in negotiations to establish closing costs for the sale of the property.
How much does an Estoppel Letter Cost?
If you're wondering how much the HOA Estoppel letter costs, the fees can range from 0-$500. HOAs usually require payments to be made before issuing an estoppel letter. An additional rush fee charges if the Estoppel letter is needed before the fifteen days. Also, an update fee may be required if there is a delay in closing.
The primary purpose of an estoppel letter is to enlighten investors of delinquent fees on an association unit or property before closing. This entire process is not the only key for investors, but it is also vital for the HOA. If there are miscalculations in delinquent fees, the HOA could incur losses. If you're still unsure of how to go about preparing the HOA Estoppel letter, we recommend that you consult with a knowledgeable HOA management company. RealManage is a reputable condominium and HOA management company that commits to offering unmatched support to HOAs.