WITH MORE THAN 1,500 Common Interest Communities (CICs) in Fairfax County alone, it is not uncommon for Northern Virginia Realtors® to work with clients who are buying or selling a home located in a Condominium or Property Owners’ Association.
Requirements for the buyer, seller and CIC are determined by Virginia law and outlined in the Property Owners’ Association Act and the Condominium Act (the “Acts”) – but the complexities of the Acts can lead to questions such as, “When does the three-day right of rescission start?” and “What if the resale disclosure packet is incomplete or out of date?”
What is a Common Interest Community?
A generic term used to describe both Property Owner's Associations (sometimes known as Homeowner's Associations or HOAs) and Condominium Associations.
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At the NVAR Legal & Appraisal Summit on Nov. 21, 2019 Delegate Marcus Simon (VA-53), an NVAR member, attorney and a founder of Ekko Title, clarified CIC law and the NVAR contract. Simon highlighted the following important steps and procedures to observe when buying or selling a home located in one of these communities:
- The seller requests an association disclosure packet from the CIC.
- The CIC has 14 days to provide the packet to the seller. The obligation of the CIC is to the seller – not the buyer. The seller is not obligated to give the packet to the buyer within 14 days, but it is in the seller’s best interest to do so.
- The buyer’s right of rescission begins after receipt of (i) the resale packet; (ii) a packet that does not contain the information required by the Acts; or (iii) notice that the packet will not be available. In any dispute, the sender has the burden to prove delivery.
- Once the right of rescission begins, the buyer must exercise the right:
- Within three days after the date of the contract, if the packet or notice was received on or before the date of signing;
- Within three days after receipt of the resale packet or notice, if received after contract signing by (i) hand delivery; (ii) electronic means; or (iii) by a commercial overnight delivery service or United States Postal Service, and a receipt is obtained; or
- Within six days after the postmark date if the resale packet or notice is received after contract signing and by United States mail.
- The buyer may also cancel at any time before settlement if the buyer has not been notified that the packet will not be available, and the packet is not delivered to the buyer.
- The right to receive the resale packet and the right to cancel the contract are waived conclusively if not exercised before settlement.
FREQUENTLY ASKED QUESTIONS:
Q: MY BUYER RECEIVED THE RESALE DISCLOSURE PACKET, BUT IT IS INCOMPLETE. WHAT ARE MY OPTIONS?
Under the Acts, the buyer’s sole remedy for delivery of an incomplete packet is to cancel the contract within the three- day period. The buyer may request an updated packet but doing so will not extend the three-day right of rescission.
Q: WHY DOES THE NVAR CONTRACT SPECIFICALLY STATE THAT THE BUYER’S SOLE REMEDY IN THE EVENT OF INCOMPLETE DISCLOSURE PACKET IS RESCISSION WITHIN THREE DAYS? CAN THE PARTIES AGREE TO EXTEND THE PERIOD?
No. The provisions of the Acts cannot be varied by agreement, and the rights conferred cannot be waived. NVAR has been working closely with Virginia Realtors® in anticipation of the 2020 Virginia legislative session and will propose several amendments to the Acts – one of which is to allow the parties to extend the three-day period to up to seven days if the buyer requests an updated disclosure packet.
Q: WHAT IF THE DISCLOSURE REVEALS THERE ARE VIOLATIONS?
If the buyer didn’t cancel the contract within the three-day period, some sellers think they don’t have to fix noticed violations. However, the seller agrees in the title paragraph of the contract to comply with all CIC association notices and orders of violation. This obligation exists regardless of whether the buyer exercises the three-day right of rescission.
Obtaining written confirmation from the CIC association is the best way to ensure that the violation has been cured.
Sellers may be in breach of contract if they fail to correct the violations before settlement.
Q: WHAT IF THE PROPERTY IS SUBJECT TO MULTIPLE CICS?
Since a disclosure is required for each association, there is a three-day right of rescission after delivery of each disclosure packet or notice that the packet will not be available.
Q: MY BUYER HAS NOT RECEIVED THE DISCLOSURE PACKET OR NOTICE THAT IT WILL BE UNAVAILABLE. SETTLEMENT IS SCHEDULED FOR TOMORROW. WHAT ARE MY OPTIONS?
The buyer may deliver notice to cancel the contract at any time prior to settlement so long as the buyer has not received the packet or notice that the packet will not be available.
While the parties are always free to mutually agree to extend the settlement date, the right to receive the resale packet and the right to cancel the contract are waived conclusively if not exercised before settlement. This means that the settlement date will not be automatically extended when the packet is delivered the day before closing. In that event, the buyer’s sole remedy is to cancel the contract before settlement.
Disclaimer: This article does not constitute legal advice; contact the NVAR Legal Hotline at NVAR.com/legalhotline with further questions.
Daniel B. Harris, Esq. is the NVAR staff attorney.
Kate O’Toole is the NVAR digital content manager & senior editor.