Part 4 - HOA Documents & Multi-Unit Disclosures
There are a number of specific disclosures for the sale of a condo, TIC, or co-op, which are property types that are all governed by a homeowner’s association (HOA). These documents also apply when a property is purchased in a subdivision with an HOA.
HOA Disclosures
As a buyer of a property with common spaces and amenities and shared costs, it’s important to understand not just the rules for living in the community, but also how the property is governed. In addition, you need to understand the full scope of your financial commitment with HOA fees and other major costs.
As the seller, you are legally obligated to provide HOA disclosures within seven days of accepting your offer. But to ensure a smooth transaction, I always advise my sellers to provide the required HOA documents in the disclosure package from the start.
HOA disclosures may include, but are not limited to:
Covenants, Conditions and Restrictions (CC&Rs)
CC&Rs detail the rules and agreements every owner in the building is required to abide by as a member of the HOA. As a property owner, you agree to follow the rules and ensure your property is in compliance with the CC&Rs. If you are not in compliance, there may be penalties the HOA can levy against you (which are detailed in the document). There may be some additional house rules.
HOA Bylaws
The HOA Bylaws detail how the HOA is governed and what type of governing body oversees its activities and finances. Most HOA’s are governed by a board consisting of residents in the community who are elected by other residents. The terms of their tenure, frequency of meetings, and a general outline of their operating procedures are included in the bylaws.
Financial Disclosures
The HOA will provide an operating budget and yearly financial records for potential buyers to review. Financial disclosures should be carefully examined; not only do they show what the HOA dues cover, but also how well the HOA manages the finances and what additional expenses you might need to pay for down the road. Buyers should be prepared to pay the monthly HOA dues plus any pending special assessments.
Special assessments are costs for improvements and repair projects shared by all the owners in the building that are not paid for out of the operating fund; for example, replacing the roof, repairs to a shared garage or courtyard, or painting the building’s common areas. HOAs can authorize special assessments and also approve increasing dues; as a buyer, it’s important to know how often special assessments or dues increases take place and if they will happen again soon.
A reserve study may also be provided so that buyers can see what repairs are pending and whether the HOA has the funds to cover the costs of those repairs.
HOA Minutes
Minutes from the HOA meetings are also provided and are important to review. These documents provide insights into the daily operations of the HOA board and how well the property is managed. They can also detail any potential issues between residents, or provide insight into upcoming projects.
Multi-Unit Building Disclosures
If you are selling or purchasing a multi-unit building, there are additional disclosures that are required for the transaction. Many of these documents are related to the occupation/tenancy in the building and are required by law in San Francisco. Tenancy and the amount of rents paid by tenants can have a big impact on property value. Depending on the occupancy of the property at the time of the sale these disclosures may include:
- Vacant Unit Disclosure
- Seller’s Rental Property Statement
- General Information Statement Regarding Tenants’ Rights Disclosure
- Tenant Buyout Legislation Advisory and Seller’s Disclosure Regarding Buyouts
Know Before You Buy
As always, my job is to help buyers and sellers understand these documents and, as your trusted guide, I’m here to answer any questions you have about these disclosures. Particularly when buying into a community, it’s vital to clearly understand your obligations, especially financial ones, before you commit to the sale.
Read Part 1 of the Series:
Seller Disclosures
Read Part 2 of the Series:
Reports
Read Part 3 of the Series:
Preliminary Title Report
Read Part 5 of the Series:
Compliance Disclosures and Certificates
Read Part 6 of the Series:
General & Other Disclosures
