Associa’s motive behind HOA document fees: Your Money

By Deborah Goonan, Independent American Communities

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Legislative season is in full swing in the state of Florida (and other states) across the US. As usual, the lobbyists for HOA and Condo Association management companies are out in full force, spreading their propaganda about how diverting higher fees into their coffers is somehow good for homeowners.

Associa has evidently inserted itself as the lead HOA management corporation to vigorously oppose consumer-friendly legislation aimed at putting an end to excessive and unnecessary document fees. The mega-management giant, which profits enormously from the fees it charges homeowners, is now telling anyone who will listen that passing FL SB 722 will amount to a “home tax” upon all homeowners within an Association Governed Residential Community.

Huh? Just a few short years ago, industry leaders and lobbyists were telling us that HOAs are NOT governments collecting taxes, but they are merely businesses collecting service fees.

But now, all of a sudden, if Association Management firms cannot collect their HOA disclosure document fees up front, and a home sale falls through, the HOA will have to pick up the cost of producing those documents for the would-be buyer. This is what Associa is calling a “home tax.”

Of course, just like the government expects their tax payments, no matter what,  the idea of Associa simply absorbing the cost of providing disclosure documentation appears to be out of the question.

 

Let’s debunk a few more of  Associa’s talking points!

In a standard residential real estate sale, homeowners’ associations (HOAs) are paid for providing financial information and documentation to prospective buyers, much like other service providers involved the transaction (e.g. surveyors, appraisers, inspectors, etc.). As proposed in SB 722, associations would have to wait to collect their service fee until after the sale closes, leading to potential non-payment or costs due to chasing payment. In addition, although not in the current version of the bill, proponents have expressed a desire to also include an arbitrary fee cap for production of this information.

Why is Associa comparing estoppel letter or disclosure documents to an appraisal or inspection? They are not the same at all.

For instance, state real estate agents are required to provide to a prospective buyer AT NO CHARGE  a written seller disclosure form, that provides basic consumer information on the condition of the house/property. Then the buyer can also OPT TO PAY FOR AN INSPECTION to verify the claims on the seller disclosure and/or discover details that may not be provided on a seller disclosure (as in the case of an estate or bank owned home).

Would you trust a home inspection provided by the seller, and then pay the seller for that inspection?

Probably not.

Now let’s look at appraisals.

The reason that buyers pay separately up front for an appraisal (even if not required by a mortgage lender) is to ensure the appraisers  objectivity and “arm’s length” judgment of the market value of the home.

It’s important to recall that in the years leading up to the housing market collapse, appraisers were commonly affiliated with a lender or real estate brokerage firm. That put enormous pressure on appraisers to create appraisal reports that would justify rapidly rising sale prices in a hot market. Because of revised regulations following the mortgage foreclosure crisis, appraisers must be independent, and are no longer tied directly to the lender or real estate broker, who, of course, have a vested interest in selling homes for the highest price possible.

Most importantly, management companies now use sophisticated, proprietary accounting software to track HOA member accounts and budget reports for association board members. If the manager has been doing the job correctly and consistently all along, there should be relatively little effort involved in generating the applicable disclosure letters and reports for buyers. And since most of the information is available over the internet, there is usually no need to print out copies or hand deliver documents.

 

Want more common sense analysis?

Here’s why Associa says that their document fees should not be limited, and should be paid prior to the close of sale:

…by eliminating the certainty of payment and arbitrarily capping that payment, the legislature is going to shift the costs for this information from the seller and buyer to the rest of the homeowners in the community when the HOA will be forced to raise dues to cover its operating budget.”

 

As for cost shifting to all homeowners in the community – so what? That is the nature of HOAs! ALL financial obligations and liabilities are shared, because there is collective ownership of property that was the basis for creating an owner’s association in the first place.

Providing prospective buyers with financial disclosures involving the condition of the Association, or statements detailing money owed to the Association, is merely a cost of doing Association business. Why should a buyer have to pay disclosure fees for information that is critical to their buying decision and the amount of their offering price?

Realtors will tell you that excessive or surprise fees at closing have derailed quite a few home sales. In other cases, the buyer demanded an adjustment in the purchase price. Lower purchase prices lead to lower appraisals for resales in the entire Association. That’s the reason for SB 722 in the first place.

 

More facts.

By the way, if you read SB 722, you will see that, if the sale does not go through, the seller is obligated to pay the estoppel fee. If the seller is delinquent on assessments – creating the need for the estoppel report in the first place – the seller will likely also fail to pay the estoppel fee. Yes, that additional financial burden then shifts to all homeowners. All the more reason that the management company should not be charging unlimited estoppel fees in the first place.

Incidentally, self-managed associations do not incur these fees, nor do they pass them along to buyers or sellers.

 

So why is Associa fighting so hard to defeat SB 722?

The motive here for Associa – and other management companies – is to create a guaranteed fee stream up front. Makes you wonder why? Is it because the sale may not go through when a buyer decides to walk away, unwilling to pay off delinquent Association accounts stacked primarily with attorney fees and collection costs, plus a management “document fee” on top of that?

A picture is worth 1000 words

In case you have any doubt at all about why Associa is opposing Florida legislation regulating fees on financial disclosures such as estoppel letters, here is a screen shot of their document processing affiliate: Community Archives.

Speaks for itself, doesn’t it?

 

http://www.communityarchives.com/news2.html

 

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Here you can see clearly that Community Archives is affiliated with Associa

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Draw your own conclusions.

 

Reference:
Associa Opposes Florida HOA Legislation – Yahoo Finance
https://www.cnbc.com/2016/01/13/globe-newswire-associa-opposes-florida-hoa-legislation.html

1 thought on “Associa’s motive behind HOA document fees: Your Money

  1. A very good blog article, Deborah Goonan. Thank you for clarifying Associa’s “stance” and the proposed HOA legislation in Florida.

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