Seller's Failure to Disclose a Pending Assessment

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I am about to close on a condo unit. At the last minute, we received the resale document from the management company. All units are being assessed a one time charge of $3000 due in full Nov. 1 for roof repairs needed. I have not closed yet, but we are in contract. Who is responsible to pay this assessment? The current owners (sellers) or me, the buyer? I do not want to pay for this assessment as I am not the unit owner at the time this special assessment was placed.


This is a good question, and applies not only to HOA assessments, but property taxes, etcetera. The owner of record as of the assessment date is responsible.

However, assessments of this size generally have to approved by the association at large, so there was almost certainly a vote of the owners, so they knew about the assessment, and it should have been disclosed to you. Even if the owners at large didn't vote, it shows up in the minutes of the board, which the board is required to inform the owners of. The current owner knew, or should have known, and kept it to themselves in violation of the law. Most states treat this as fraud on the current owner's part (talk to a lawyer in yours). One more issue is why did the condo certification not show this assessment?

As for you reaping the benefits, that would be the case if they paid it now and you bought the day after. Tough cookies for them. It's part of owning communal property. The only way to determine who owes the assessment is who owns the property on the assessment date, but that doesn't mean that known assessments don't have to be disclosed. Indeed, homeowner's association information disclosure is a standard feature written right into all the standard WINFORMS contracts.

If they had disclosed this like they should have, it's likely you would have negotiated something as part of the purchase contract. As it is, you now have them in a hammerlock, because even if the assessment is due after the contracted closing date, their failure to disclose does mean that a reasonable person might not have entered into the contract you did. Even if it's not criminal fraud, it is a legal tort, and you're likely to recover legal fees and maybe damages if you sue (again, talk to a lawyer before you draw any lines in the sand). If they're smart, they'll pay the assessment out of sale proceeds and save themselves all that. On the other hand, if they were smart, they wouldn't be in this predicament, would they?

You probably have the option of bailing out, as well, even if the contingencies have all expired. Of course, all of the standard warnings about your deposit apply. Just because it falls out of escrow doesn't mean the escrow company will return the deposit. The other side has to agree, or you've got to get a judgment. Again, they're likely to end up responsible for your legal fees as well as their own and not getting the deposit anyway, so it would be smart for them to just agree. Unfortunately, all too many people aren't smart - they're hoping to scam something. The vast majority of the time, it costs them more than they might possibly have scammed even if they were successful.

This all applies to property tax assessments as well, except that around here the title search should have disclosed that, and it should have been on the title commitment (aka preliminary title report). Nonetheless, the owner and their agent are still responsible for disclosing it in a timely manner, although the exact period from acceptance of the contract varies. Ditto Mello-Roos assessments here in California, although there's a space in MLS itself for disclosing those. It's very rare for there to be a pending Mello-Roos, as they're used to pay for installing public utilities in new developments.

One more thing: Your buyer's agent should have covered all this. If you decide to bail out of this transaction, fire them. If you've been using the listing agent as a Dual agent handling both sides of the transaction, you've just had a practical demonstration in one of the hundreds of reasons why that is a very bad idea. Go get yourself a Buyer's Agent that is going to work on your behalf.

Caveat Emptor

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About this Entry

This page contains a single entry by Dan Melson published on January 7, 2014 7:00 AM.

The Sperm Donor Theory of Buyer's Agents was the previous entry in this blog.

Mortgage Foreclosure and Taking of Other Assets is the next entry in this blog.

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