Handling Prospective Buyer's Request

wow... at first reading Roger, i thought "How harsh! Just typical of a strict HOA to stiff a potential newcomer to the neighborhood...", but then I began to think about it, and see some wisdom in your words.

This issue really puts me on the fence: I believe the HOA should interact with potential owners before they become owners with problems (unrealistic expectations, etc.), but I also see the mandate we have to deal with owners, and not non-owners. open the door to dealing with outside folks, and we can get into a lot of serious trouble. What if we dispense poor advice? WHat if we agree to something that is later changed? Have we set precedent? Are we liable somehow? Very chilling thoughts.

On the other hand, trusting the owner to disclose fully everything, AND interpret the covenants could leave a new owner with a bad taste in their mouth, and start the HOA and them off adversarially.

I think you have some good ideas Roger. I would suggest a nice letter that clearly explains the reasons the HOA won't be dealing directly with the prosepective buyer. It can also include information on the HOA as a great place to live, and other propaganda showing how helpful we want to be, but explaining the process to the buyer so they understand. Basically, something more "we would like to help, but we can't do these things" rather than "See my lawer." Soft sell, honey traps more flies, etc..

We have not yet had a prospective owner approach us, so I am glad I know what to say when they do.
I am growing more and more concerned and annoyed, however, because new residents complain they didn't know about the CC&Rs upon moving in the the neighborhood. They are either lying or the real estate professionals are not doing their job on this issue. I have considered writing a letter to the local Board of Realtors reminding them of their responsibility in providing such documents. Is that out of line, out of my realm?

Harold, the same is true in Colorado. Specific HOA documents are required to be given by the seller to the buyer in advance and it is the responsibility of the seller to provide the documents. That is why the buyer is required to sign a seller's disclosure form at closing. Furthermore, DARCO requires a copy of that form to be sent back to the HOA for protection in case the buyer later claims they didn't get the documents and wants to sue the HOA.

In Colorado it is my understanding that real estate agreements for the seller and buyer require going through their real estate broker. If the buyer or seller bypasses their broker a wise broker terminates their agreement; because if it went to court the broker, not their client, could be held responsible and could lose their license.

Roger, I believe you a citing SB-05-100 (CRS 38-33.3-223 & 38-35.7-102).
But SB-06-089 repealed 38-33.3-223 and rewrote 38-35.7-102 removing several key paragraphs.
The way I read SB-089, the seller provides documents *only* upon request of the buyer and the buyer is no longer required to sign a recipt for the information. And there is nothing to send back to the Assn.

Roger, I've emailed the document along with comments.
I'd suggest other Colorado readers visit the following:
http://www.hoalegislate.com (and scroll down to "SB 100 & SB 89 Resources")

On your original question.... As you might suspect, I regard your "No Contact" guideline as overly formal and "fussy".

I do think any contact with the association should include the association president and not be with just a committee chair.

I agree an architectural "approval" can not be issued to a non-owner, but I see no reason a "letter of understanding" cannot be issued which states the anticipated or probable action the association would take in response to a particular request. I would probably ensure any written communication be approved by our attorney.

In a situation such as you describe (several years ago), the president (at that time) simply explained the deed restriction to privacy fences on the particular lot to both the seller and the (prospective)buyer and indicated there was no anticipation or committment to waive or change the restriction.
I think this was the right way to handle that case. --LD

I've taken Roger's excellent suggestions regarding not communicating with potential buyers and drafted a letter which can be placed on our web site, if we get one, and if the board approves the letter.

It deals directly with the question of who the buyer is to contact, but does not state specific examples, such as Architectural Committee.

It also states what the seller and association must do upon receiving notice of the sale.

I reprinted the Arizona state statute so the buyer can know exactly what the association should send.

Any comments are welcome.

Bill

BUYER INFORMATION

To potential homebuyers in the XYZ Community, we welcome you to the community and sincerely hope you
enjoy living here as much as we do.

The ByLaws, CC&R's, Articles of Incorporation and Rules and Regulations are all public information,
and for the convenience of our Members and potential buyers, we have placed them in the public area of this web site so anyone can review them.

The volunteer Board of Directors are required to serve only the Members (homeowners) of the community, therefore, for legal reasons cannot answer questions from non-members (potential home buyers).

If you have questions regarding the community that are not addressed on the web site, please ask your realtor, who will contact the seller realtor to get answers from the seller. The seller can then contact our Management Company to obtain the answers for you.

Upon the sale of a home in the community, Arizona statute requires specific duties of the seller and buyer.

For the convenience of both buyer and seller, we are reprinting the Arizona state law section 33-1806 below. The statute requires that when the sales contract is signed, the seller must provide a written notice to our Management Company of the sale along with your name and address. Within 10 days after receiving that information the Management Company, on behalf of the Association, is required to mail or deliver to you the following documents:

A. For planned communities with fewer than fifty units, a member shall mail or deliver to a purchaser within ten days after receipt of a written notice of a pending sale of the unit, and for planned communities with fifty or more units, the association shall mail or deliver to a urchaser within ten days after receipt of a written notice of a pending sale that contains the name and address of the purchaser, all of the following:

1. A copy of the bylaws and the rules of the association.
2. A copy of the declaration.
3. A dated statement containing:
(a) The telephone number and address of a principal contact for the association, which may be an association manager, an association management company, an officer of the association or any other person designated by the board of directors.
(b) The amount of the common regular assessment and the unpaid common regular assessment, special assessment or other assessment, fee or charge currently due and payable from the selling member.
(c) A statement as to whether a portion of the unit is covered by insurance maintained by the association.
(d) The total amount of money held by the association as reserves.
(e) If the statement is being furnished by the association, a statement as to whether the records of the association reflect any alterations or improvements to the unit that violate the declaration. The association is not obligated to provide information regarding alterations or improvements that occurred more than six years before the proposed sale. Nothing in this subdivision relieves the seller of a unit from the obligation to disclose alterations or improvements to the unit that violate the declaration, nor precludes the association from taking action against the purchaser of a unit for violations that are apparent at the time of purchase and that are not reflected in the association's records.
(f) If the statement is being furnished by the member, a statement as to whether the member has any knowledge of any alterations or Improvements to the unit that violate the declaration.
(g) A statement of case names and case numbers for pending litigation with respect to the unit filed by the association against the member or filed by the member against the association. The member shall not be required to disclose information concerning such pending litigation which would violate any applicable rule of
attorney-client privilege under Arizona law.
(h) A statement that provides:
"I hereby acknowledge that the declaration, bylaws and rules of the association constitute a contract
between the association and me (the purchaser). By signing this statement, I acknowledge that I have read and understand the association's contract with me (the purchaser). I also understand that as a matter of Arizona law, if I fail to pay my association assessments, the association may foreclose on my property."

The statement shall also include a signature line for the purchaser and shall be returned to the association within fourteen calendar days.
4. A copy of the current operating budget of the association.
5. A copy of the most recent annual financial report of the association. If the report is more than ten pages, the association may provide a summary of the report in lieu of the entire report.
6. A copy of the most recent reserve study of the association, if any.
B. A purchaser or seller who is damaged by the failure of the member or the association to disclose the information required by subsection A of this section may pursue all remedies at law or in equity against the member or the association, whichever failed to comply with subsection A of this section, including the recovery of
reasonable attorney fees.
C. The association may charge the member a reasonable fee to compensate the association for the costs incurred in the preparation of a statement furnished by the association pursuant to this section. The association shall make
available to any interested party the amount of any fee established from time to time by the association.
D. A sale in which a public report is issued pursuant to sections 32-2183 and 32-2197.02 or a sale pursuant to section 32-2181.02 is exempt from this section.
E. For purposes of this section, unless the context otherwise requires, "member" means the seller of the unit title and excludes any real estate salesperson or real estate broker who is licensed under title 32, chapter 20 and who is acting as a salesperson or broker and also excludes a trustee of a deed of trust who is selling the property in a
trustee's sale pursuant to chapter 6.1 of this title.

Roger, Good point. I agree such a letter should go through the seller. But out of curiousity, can you cite the real estate regulation? Is this a statute or simply a regulation applicable to licensed realtors? Nevertheless, I have and expect to continue to "talk to" any buyers that express an interest in conversation. I welcome the opportunity to explain governing documents. The risks have to be less than driving on the interstate.

Lou, I think your attitude of wanting to help prospective buyers understand the HOA documents is admirable. BUT - what if after a conversation with you the propective buyer backs out of a contract. Then the seller asks their real estate agent to find out why. And the buyer's indicates it was because they didn't like something based on what you explained to them. You have placed yourself in the position of a potential law suit. That is why I emailed this HOA and posted the email on this Board. I am not a real estate agent and most of the homeowners serving on Boards, ARCs, and reading this thread aren't.

This example illustrates why I believe every MC shoud have a Real Estate Broker on their staff.

For our state it is the title companies who are required to give the buyers the governing documents of the HOA they have purchased into.
When we receive a complaint from a new member about 'not knowing the rules' I direct them to their title company folder 'You know the big, thick one you received when you signed the closing papers?' Once they find it, their those darn governing documents they claim they never got are.
The title company agents I have worked with directly are good about pointing out the existence of the governing documents in the packet but people hear what they want to hear, like 'sign on the dotted line'...twelve times!