Transfer Fees and Disclosures - New Law!

Assembly Bill 771 (Assemblyman Betsy Butler) was sponsored by the California Association of Realtors. For obvious reasons, CAR believes that full disclosure should be made about costs in a real estate transaction. HOAs are not exactly consistent in the charges made for providing disclosures in a sales transaction. The bill identifies fees that may be charged to purchasers by sellers for providing documents upon sale or transfer of a property in a common interest development, changing the language to incorporate processes for providing electronic documents.

The Davis-Stirling Act requires a seller of a separate interest in a common interest development to provide specified documents to a prospective purchaser. The documents have to be provided within 10 days of the mailing or delivery of the request (usually coming in as an escrow demand made to the association as the seller may ask the association to provide the documents). Under this new law, an association then has to provide, on a fairly specific form (download sample below) specified in the new law, a written or electronic estimate of the fees to be charged for providing the requested documents.

New - Electronic Format Okay
The documents required may be maintained in electronic form and may be posted on the association's Internet Web site. Requesting parties (representing the prospective purchaser) have the option of receiving the documents by electronic transmission if the association maintains the documents in electronic form.

Fees Allowable
The association may charge a reasonable fee based upon the association's actual cost for the procurement, preparation, reproduction, and delivery of the documents requested pursuant to the provisions of this section.

Once the charges have been estimated on the form, no additional fees may be charged by the association for the electronic delivery of the documents requested. Fees for documents required to be provided are distinguished from other fees such as key or gate fees, fines, or assessments that are due as part of the sales transaction.

Delivery of the documents required may be conditioned on the payment of the fee allowed. Practically, the HOA can require the payment up front but it is likely that these fees will be added to the distribution to be made upon close of escrow. Because of the failure in recent years of some escrow officers to pay fees when the monies are distributed, it is possible that some HOAs or managers who provide the documents will require payment prior to delivery.

The HOA may contract with any person or entity to facilitate compliance with the requirements of this subdivision on behalf of the association. HOAs are likely to contract with managers or online services like CondoCerts and other providers to make the documents available for a fee, which must be paid to the service or company in order to retrieve the documents.

What Are The Required Disclosures?
The disclosures (found in Civil Code Section 1368) have for a long time included the governing documents of the association; the financials and most recent disclosures that are made to owners, any occupancy or age restrictions inconsistent with those allowed by law; outstanding assessments, association fees, fines, outstanding violations of the documents (for which the selling owner has received prior notice), liens, any changes in the association's documents that have been approved but are not yet in effect, etc.; and information related to any defects identified as a result of defect litigation.

What is new under this new statute is that up to 12 months of minutes, except executive session minutes, are subject to disclosure if the prospective purchaser asks for them. Also, under a new law described in an earlier article, any rental restrictions appearing in the governing documents must be disclosed.

Last but not least, if any party required to do so on behalf of the selling owner, including the association, does not provide the disclosures within 10 days of the written request, the party is subject to a $500 fine and, if litigation ensues, the prevailing party is entitled to recover attorney fees.

There are some special rules that relate to Community Service Organizations that are not covered in this article. Check with your attorney if you have questions about CSO disclosures and allowable charges.

---

Beth Grimm is an attorney with offices in Pleasant Hill. She is a member of ECHO and various other industry organizations in California and nationally. She can be contacted through her website www.californiacondoguru.com. She was named by ECHO as the 2011 Volunteer of the Year. She is also the co-chair of the East Bay Resource Panel.