Co-Author: Karen Radakovich, Esq.
As a REALTOR® what do I need to know about Senate Bill 100 (“SB100”), the law which requires sellers to provide homeowners’ association governing documents and other financial information to buyers?
Part I, addressed seven questions related to Senate Bill 100. This two part article does not purport to be a comprehensive discussion of SB100. It is a complicated bill addressing many things of interest to anyone associated with a common interest community. This two part article limits itself to addressing issues that are relevant to the practice of real estate brokerage.
What is the seller supposed to do with the receipt from the buyer acknowledging the buyer’s receipt of the delivered documents?
The seller is obligated to deliver the receipt to the association “. . . as soon as practicable after closing.”
What are the consequences to a seller if the seller does not comply with SB100?
The purchaser shall have a claim against the seller for all damages resulting to the purchaser, plus court costs. Attorney’s fees are omitted from this section of the statute, suggesting that the buyer is not entitled to recover attorney’s fees. The extent of the buyer’s damages are murky. Suppose a buyer was not given the documents and the notice and the association has dues of $200 per month. Does the buyer have any damages if the buyer receives good value for his dues of $200 per month.
What if the owners’ association no longer exists or functions in a particular subdivision?
The provision cited in the answer to Question 4 above relieves the seller from the obligation to provide documents which don’t exist. Brokers should, however, still assist sellers in obtaining a receipt from buyers. The receipt could acknowledge that the buyers have been informed they had a right to receive such documents had they existed, that such documents do not exist, and that they will not hold the seller responsible for the lack of documents. This approach should not be used to circumvent the spirit of SB100, but it should work when there is a bona fide situation where the documents are not available.
How can sellers and real estate brokers cope with the situation where the buyer refuses to sign acknowledging receipt of the documents?
The statute does not address this question. The Hotline suggests that brokers address this situation in two ways. When buyers refuse to sign, brokers can still establish a record through e-mails, faxes, and letters to the selling broker and/or buyer that the documents have been delivered but that the buyer has refused to sign the receipt. Secondly, brokers are encouraged to insert a provision into the buy/sell contract obligating the buyer to sign the receipt.
Brokers do not have the ability to compel associations to provide these documents. How can brokers protect themselves from sellers who are not sufficiently aggressive to extract the documents from the owners’ association?
The Hotline encourages brokers to have a provision in their listing agreement educating sellers about the need to obtain these documents and obligating sellers to do so immediately after the listing is taken.
If the buyer doesn’t receive the covenants or acknowledge receipt of them, is the buyer still bound by them?
Yes; Buyers are on notice of, and take their title subject to, the burdens of the covenants (whether they have received paper copies of them or not), so long as they are recorded in the Clerk and Recorder’s Office in the county in which the property is located. Buyers cannot avoid being bound by the covenants by refusing receipt of the covenants or refusing to acknowledge receipt of them.