Homeowners Association

Q: I had a couple that asked me to find a home for them that did not have any sort of fee that had to be paid to a homeowners’ association (HOA).
 

I found a house that they liked a lot so I asked the listing agent (it was a property that had been foreclosed upon by the lender) to look into it. He supposedly did his research and came back and said there was no HOA fee.

I also asked the title search officer to look at this issue before the house went into contract and she also said there was no HOA fee. The only association that came up was one for the contractors for the development.

My clients purchased the home. Last week they called and said they received a statement for their HOA dues for $30 per month.

Should that have come up on the title search with the escrow instructions?
Now what do I do? My clients are upset!

A: To the best of my knowledge, an HOA should have come up on a title search. For most associations, the HOA is allowed to collect assessments by virtue of the rights given to the association in the association documents. These association documents are generally recorded against all of the titles to the homes in the subdivision or community.

The title search office may have made a mistake. In any event, the existence of a HOA should have been disclosed by the seller, even if the property is being sold to you by a relocation company.

Still, this is something you should have found out a long time ago.

One easy way to determine if there are dues owed to a HOA is to see if there are any common areas or amenities that can be used by the home your client was buying. If the development has a clubhouse, shared playground or other common amenity and you ask around and that clubhouse, playground or other amenity is not managed by the town or city or other municipal government, then it’s quite likely that monthly or annual fees from the homeowner’s must be paid.

You should have knocked on a few doors to talk to other homeowners who lived in the development so you could get some first-hand information. Other listings in the development from current or past sales may have disclosed the amount of the fees. But if you just relied on what other people told you, and they were less than forthcoming, it’s not hard to see how you’ve wound up in this difficult situation.

That's not a great way to run your business. It’s no wonder that your clients are upset.

If your clients want to explore legal options, they should talk to a real estate lawyer or litigator. In the meantime, your clients should check the documents from their closing and see if the title work showed any documentation regarding the association. If there were documents that disclosed the existence of the association and its ability to collect fees from the homeowners – whether your client’s decided to read it or not – they are on the hook to pay those fees. If the title company missed the document, the title company may have some responsibility for the error.

However, it sounds like you really didn’t do the homework your clients relied on you to do. In this respect, you failed them and they are now paying the price.

NOTE: Ilyce R. Glink's latest ebooks are "Credit Scoring Secrets" and "How to Find a Great Real Estate Agent," which are available at her website, www.thinkglink.com.If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact her through her website, www.thinkglink.com © 2007 by Ilyce R. Glink. Distributed by Tribune Media Services