RESALE
"If your association can see your backyard from space, you should probably be able to see association documents before you buy your home." — John Oliver HOA Segment | April 2023
DON'T GUESS! Buying a home in a common interest community (condo, co-op, townhome, single family, attached, detached, etc.) should not be a gamble. Purchasers should be prepared to perform appropriate due diligence and invest the time and money required BEFORE making a real property investment.
BUYER BEWARE: Your realtor may have years of experience, but probably lacks a deep understanding of the benefits, challenges and risks of community association ownership. Proper due diligence can help you avoid a $100,000+ special assessment. Got Reserve Judgement? Not sure? Get a resale review!
READ: Resale Disclosure Fail
READ: Your Reserve Study Needs Help
READ: Colorado DORA: Conducting Due Diligence Before Signing a Contract to Buy Real Property
Are you planning to purchase a condominium or home within an HOA?
Does your realtor know ALL the risks and potential benefits of community association property?
Would you like some helpful advice before you commit hundreds of thousands of dollars?
Resale certificate fees are capped at $275 by Washington state statute. Additional fees are invalid / illegal.
RCW 64.34.425 – Resale of Unit & Related RCW 64.90.640
The association, within 10 days after a request by a unit owner, and subject to payment of any fee imposed pursuant to RCW 64.34.304(1)(l), shall furnish a resale certificate signed by an officer or authorized agent of the association and containing the information necessary to enable the unit owner to comply with this section.
For the purposes of this chapter, a reasonable charge for the preparation of a resale certificate may not exceed $275.
The association may charge a unit owner a nominal fee [$100] for updating a resale certificate within six months of the unit owner's request.
The unit owner shall also sign the certificate but the unit owner is not liable to the purchaser for any erroneous information provided by the association and included in the certificate unless and to the extent the unit owner had actual knowledge thereof.
WUCIOA (RCW 64.90) allows for periodic inflationary adjustments to the $275 maximum. RCW 64.34 does not.
Your Association is ultimately responsible to comply with statutory resale requirements.
RCW 64.34.010 applies resale requirements from RCW 64.34.425 to all condominiums created before 1990 (i.e. RCW 64.32).
"Transfer Fees" are Loosely Regulated < Click to Expand 👇 ⏬ >
RCW 64.60 is Washington State's Private Transfer Fee Obligation Act. Unlike resale certificates, and is is true for most (all?) states, there are no specific protections with regard to the amounts that can be charged to buyers and sellers for "transfer fees" imposed by a management company or other third party such as a title company. Other states have similar provisions such as Florida FRS 718.112(2)(k) and Texas TPC 5.202.
Man warns others after surprise HOA fees revealed while selling Knoxville home | HOA fees to be aware of before buying or selling home
My condominium association is charging new owners $900 fee like a HOA
FL 718.112(2)(k) — Transfer fees. An association may not charge a fee in connection with the sale, mortgage, lease, sublease, or other transfer of a unit unless the association is required to approve such transfer and a fee for such approval is provided for in the declaration, articles, or bylaws.
Any such fee may be preset but may not exceed $150 per applicant. For the purpose of calculating the fee, spouses or a parent or parents and any dependent children are considered one applicant. However, if the lease or sublease is a renewal of a lease or sublease with the same lessee or sublessee, a charge may not be made.
Such fees must be adjusted every 5 years in an amount equal to the total of the annual increases occurring in the Consumer Price Index for All Urban Consumers, U.S. City Average, All Items during that 5-year period. The Department of Business and Professional Regulation shall periodically calculate the fees, rounded to the nearest dollar, and publish the amounts, as adjusted, on its website.
The foregoing notwithstanding, if the authority to do so appears in the declaration, articles, or bylaws, an association may require that a prospective lessee place a security deposit, in an amount not to exceed the equivalent of 1 month’s rent, into an escrow account maintained by the association. The security deposit shall protect against damages to the common elements or association property. Payment of interest, claims against the deposit, refunds, and disputes under this paragraph shall be handled in the same fashion as provided in part II of chapter 83.
(1) "Association" means: An association of apartment owners as defined in RCW 64.32.010; a unit owners' association as defined in RCW 64.34.020; a homeowners' association as defined in RCW 64.38.010; a corporation organized pursuant to chapter 24.06 RCW for the purpose of owning real estate under a cooperative ownership plan; or a nonprofit or cooperative membership organization composed exclusively of owners of mobile homes, manufactured housing, timeshares, camping resort interests, or other interests in real property that is responsible for the maintenance, improvements, services, or expenses related to real property that is owned, used, or enjoyed in common by the members. [notably missing RCW 64.90 and 24.03A]
(2) "Payee" means the person or entity who claims the right to receive or collect a private transfer fee payable under a private transfer fee obligation. A payee may or may not have a pecuniary interest in the private transfer fee obligation.
(3) "Private transfer fee" means a fee or charge payable upon the transfer of an interest in real property, or payable for the right to make or accept such transfer, regardless of whether the fee or charge is a fixed amount or is determined as a percentage of the value of the real property, the purchase price, or other consideration given for the transfer. The following ARE NOT private transfer fees for the purposes of this section:
(a) Any consideration payable by the grantee to the grantor for the interest in real property being transferred, including any subsequent additional consideration for the real property payable by the grantee based upon any subsequent appreciation, development, or sale of the real property, if such additional consideration is payable on a one-time basis only and the obligation to make such payment does not bind successors in title to the real property;
(b) Any commission payable to a licensed real estate broker for services rendered in connection with the transfer of real property pursuant to an agreement between the broker and the grantor or the grantee including, but not limited to, any subsequent additional commission for that transfer payable by the grantor or the grantee based upon any subsequent appreciation, development, or sale of the property;
(c) Any interest, charges, fees, or other amounts payable by a borrower to a lender pursuant to a loan secured by a mortgage against real property including, but not limited to, any fee payable to the lender for consenting to an assumption of the loan or a transfer of the real property subject to the mortgage, any fees or charges payable to the lender for estoppel letters or certificates, and any shared appreciation interest, profit participation, or other consideration, and payable to the lender in connection with the loan;
(d) Any rent, reimbursement, charge, fee, or other amount payable by a lessee or licensee to a lessor or licensor under a lease or license including, but not limited to, any fee payable to the lessor or licensor for consenting to an assignment, subletting, encumbrance, or transfer of the lease or license;
(e) Any consideration payable to the holder of an option to purchase an interest in real property or the holder of a right of first refusal or first offer to purchase an interest in real property for waiving, releasing, or not exercising the option or right upon the transfer of the real property to another person;
(f) Any tax, fee, charge, assessment, fine, or other amount payable to or imposed by a governmental authority;
(g) Any assessment, fee, charge, fine, dues, or other amount payable to an association pursuant to chapter 64.32, 64.34, or 64.38 RCW, payable by a purchaser of a camping resort contract, as defined in RCW 19.105.300, or a timeshare, as defined in RCW 64.36.010, or payable pursuant to a recorded servitude encumbering the real property being transferred, as long as no portion of the fee is required to be passed through or paid to a third party; [notably missing RCW 64.90]
(h) Any fee payable, upon a transfer, to an organization qualified under section 501(c)(3) or 501(c)(4) of the internal revenue code of 1986, if the sole purpose of such organization is to support cultural, educational, charitable, recreational, conservation, or similar activities benefiting the real property being transferred and the fee is used exclusively to fund such activities;
(i) Any fee, charge, assessment, dues, fine, contribution, or other amount pertaining solely to the purchase or transfer of a club membership relating to real property owned by the member including, but not limited to, any amount determined by reference to the value, purchase price, or other consideration given for the transfer of the real property;
(j) Any fee charged by an association or an agent of an association to a transferor or transferee for a service rendered contemporaneously with the imposition of the fee, provided that the fee is not to be passed through to a third party other than an agent of the association.
(4) "Private transfer fee obligation" means an obligation arising under a declaration or covenant recorded against the title to real property, or under any other contractual agreement or promise, recorded or not, that requires or purports to require the payment of a private transfer fee upon a subsequent transfer of an interest in the real property.
(5) "Transfer" means the sale, gift, grant, conveyance, lease, license, assignment, inheritance, or other act resulting in a transfer of ownership interest in real property located in this state.
(1) A private transfer fee obligation recorded or entered into in this state on or after April 13, 2011, does not run with the title to real property and is not binding on or enforceable at law or in equity against any subsequent owner, purchaser, or mortgagee or holder of any interest in real property as an equitable servitude or otherwise. Any private transfer fee obligation that is recorded or entered into in this state on or after April 13, 2011, is void and unenforceable.
(2) A private transfer fee obligation recorded or entered into in this state before April 13, 2011, is NOT presumed valid and enforceable. Any such private transfer fee obligation must be interpreted and enforced according to principles of applicable real estate, servitude contract, and other law including, without limitation, restraints on alienation, the rule against perpetuities, the touch and concern doctrine, and the requirement for covenants to run with the land, as well as fraud, misrepresentation, violation of public policy, or another invalidating cause.
Fees, Fees and more Fees...
The Washington State legislature was decisive when it increased the maximum resale certificate fee from $150 to $275 via SB 5224 which became effective July 24, 2011. There is no ambiguity: $275 is intended to include all costs to provide a resale certificate. Despite unambiguous statutory requirements, many management companies charge owners fees in excess of $275:
1) fees for "processing" ($20 to $50)
2) fees for "rush processing" (generally over $100)
3) fees for meeting minutes
RCW 64.90.640 requires 12 months of meeting minutes, but RCW 64.34.425 is less precise:
(q) A copy of the declaration, the bylaws, the rules or regulations of the association, the association's current reserve study, if any, and any other information reasonably requested by mortgagees of prospective purchasers of units. Information requested generally by the federal national mortgage association, the federal home loan bank board, the government national mortgage association, the veterans administration and the department of housing and urban development shall be deemed reasonable, provided such information is reasonably available to the association;
Your association's management contract likely includes language about handling unit resale and transfer of ownership without disclosing a fee schedule for resale certificates. Here's an example:
We may process Resale Certificates, as applicable to the Association, as well as certain financial forms and questionnaires necessary to complete loan packages for prospective purchasers. Such costs shall be assessed to the Owner or Buyer as appropriate and shall not constitute a charge to the Association.
RCW 64.34.304(1)(l) - Unit Owners' Association - Powers
(l) The association may impose and collect reasonable charges for the preparation and recording of amendments to the declaration, resale certificates required by RCW 64.34.425, and statements of unpaid assessments;
The Illinois Supreme Court decision in Channon v. Westward Management proves that upholding limits on fees charged to sellers, even when the statutes cap such fees, is harder said than done.
As an example, California, Illinois, Texas and Washington State all have different statutes requiring sellers to furnish resale certificates to potential purchasers. A key difference is that TX in 207.003(c) (but not in 82.157) and WA limit absolute resale fees to sellers, whereas CA Civil Code and the ILCS require "reasonable" fees. There are obvious statutory similarities related to legislative intent and whether "protections" are primarily intended to only purchasers or to both purchasers and sellers.
Form 27 - Condominium Resale.pdfForm 27 - CIC Resale (WUCIOA).pdf
