Separating Fact from Fiction

The passage of every new law brings its share of questions. Revisions to the Condominium (Condo) and Property Owner’s Association (POA) Acts, in particular, generate numerous inquiries. 

What are the fees? When is payment due? What are the rules for resale disclosure packet (“packet”) and Condo resale certificate (“certificate”) delivery? Below, we tackle these and other most frequently-asked questions from Realtors® and their clients.

Q: I thought fees for resale packets were capped at $100. Why am I being charged more?
A: Legislation in the 2007 General Assembly session changed the fees that associations may charge for packets or certificates delivered in connection with the sale of a property. Legislation passed during this year’s session further clarified allowable charges. The fee for the packet or certificate now hinges on whether the association is professionally managed by a common interest community manager (“CIC managed association”).

Associations that are not CIC managed may charge the actual cost for the preparation of the packet, not to exceed 10 cents per page, up to a total of $100.

CIC managed associations may charge the following:
• $125 for five electronic copies to go to the seller, the listing agent, the purchaser, the purchaser’s agent and one additional person designated by the requestor, and $150 for two hard copies of the packet or certificate 
• $100 for a physical inspection of the property, if the association has architectural control over the unit (no additional inspection fee may be charged for unimproved lots except for those already outlined in the Code)
• $50 to the purchaser for a post-closing fee to change the association’s records to reflect the new owner.
The association may not charge additional fees to access the CIC managed association’s website. 

The association or its manager may charge for the following items requested by the seller or seller’s agent:
• $25 for each additional hard copy of the packet or certificate
• $50 to expedite delivery of the packet or certificate
• Actual cost paid to a third-party for hand-delivery or commercial overnight delivery of the packet or certificate.
The fees for professionally-managed associations shall adjust in accordance with the United States average Consumer Price Index every five years.

Q: What exactly is a “common interest community manager”?
A: A CIC manager is defined as a person or business entity that provides management services to an association for a fee or other compensation. Those management services may include the following: 
• Acting for the association in its business, legal, financial or other transactions with association members and nonmembers 
• Executing the resolutions and decisions of an association or enforcing the rights of the association secured by statute, contract, covenant, rule or bylaw
• Collecting, disbursing or otherwise controlling money or other property belonging to an association 
• Preparing budgets, financial statements, or other financial reports for an association
• Arranging, conducting or coordinating meetings of an association or the governing body of an association 
• Negotiating contracts or arranging for services or the purchase of property and goods for or on behalf of an association 
• Offering or soliciting to perform any of these services on behalf of an association.

Q: The property I’m listing has more than one community association. What are the fees in that case?
A: The Code states that each association may charge the full fees allowed under the law. 

Q: In the past, I’ve requested expedited delivery for the packet or certificate and paid the appropriate fee, only to have it take just as long as a normal request. What am I actually getting for the extra fee?
A: The law states that the association or manager may only charge $50 for expedited delivery if the inspection and the delivery of the packet or certificate are completed within five business days of the request.

Timetables for other deliveries are as follows:
• Initial disclosure packet or certificate: 14 days from request
• Disclosure packet or certificate updates: 10 days from request
• Financial updates for settlement agents: three business days from request.

Q: I heard that fees are now deferred until settlement, but an association is asking for payment up front. How can this be?
A: The Code is  clear on this issue for CIC managed associations. No such association or CIC manager shall require cash, check, certified funds or credit card payments at the time requests are made for packets or certificates, packet or certificate updates or financial updates. The fees shall be collected at the time of settlement and shall be payable from the settlement proceeds. If the property does not settle within 45 days, the association or its manager may then assess those fees against the lot owner.

For non-CIC managed associations, payment deferral options are less clear. The Code is silent about when payment is due for the initial packet or certificate request. The law does state that payment for updates shall be collected at the time of settlement. One may argue that the intent of the legislation was to defer all payments to settlement. However, until this section is clarified, associations without professional management may continue to request payment at the time of the packet request. 

Q: I would like to order three hard copies of the packet or certificate. Will I be charged for the third one?
A: For CIC managed HOAs, the first two hard copies are included in the initial fee. The association may only charge $25 for each additional hard copy requested. For certificates, this fee structure applies for both CIC and non-CIC managed associations.

For non-CIC managed HOAs, the statute is less clear. The maximum fee that may be charged for packets is $100. The statute does not address fees for additional copies. However, the statute does provide that if requested in electronic format, the seller may designate up to two additional recipients to receive the packet in electronic format at no additional charge.

Q: I would like to order two copies of the packet or certificate update. Will I be charged for the second one?
A:  If the update is requested by a buyer or a settlement agent, the seller or his agent shall receive a copy of it at no additional cost. However, unlike the provisions for the original disclosure packet, the statute does not provide for additional free copies of the update to the purchaser, the purchaser’s agent or another designated person. If purchasers or their agents request an update, they may be charged no more than $50.

For certificates, the statute provides for the same fee structure as for CIC managed associations.

Q: My clients prefer to receive a paper copy of the packet or certificate, but the association prefers electronic delivery. Do I have to agree to electronic delivery?
A: No. The seller or his authorized agent may request that the packet or certificate be provided in either hard copy or electronic form. The seller may also pick up a hard copy of the packet or certificate at the association’s place of business. Packet and certificate updates and financial updates must also be provided in hard copy if requested.

Q: I ordered a packet or certificate and it was delivered, but upon review it is incomplete. What can I do?
A: If the association fails to provide the documents substantially in the form dictated by the statute, then the association shall be deemed to have waived any claim for delinquent assessments or of any violation of the declaration, bylaws, rules and regulations, or architectural guidelines existing as of the date of the request with respect to the subject lot. However, this waiver is a limited waiver. If indeed there is a violation or a delinquent assessment, the buyer will still have to bring the unit into compliance. The association will have to pay the first $1,000. Any cost above and beyond will be borne by the purchaser. 

A purchaser can accept the packet or certificate as is, or may cancel the contract. A purchaser who agrees to accept it as is may be liable for any non-compliance with the association rules.  

Q: An association is telling me that the resale packet is only good for two months. If the property doesn’t settle by then, I’ll need to order a whole new packet at full price. Can they do this?
A: If you have requested a packet or certificate within the past 12 months, you can request an update at a cost of $50. These updates shall include a copy of the original packet or certificate. There is no requirement that you pay the initial fees unless the request comes after the 12-month period has expired.

Q: What happens if the disclosure packet is not delivered within 14 days or if I received a disclosure packet that is dated more than 12 months ago?
A: You can accept the packet or certificate as is, or you may cancel the contract. If you agree to accept the packet as is, please read the answer above, as the purchaser may be liable for any non-compliance with the association rules.  

Q: I ordered and received a complete packet or certificate but it is 11 months old. My client wants to order an update. The association has 10 days to provide it to me, but doesn’t my client only have three days to make up his mind?
A: Well by now you know the answer: you may accept the packet or certificate as is, or you may cancel the contract. If you agree to accept it as is, the purchaser may be liable for any non-compliance with the association rules.

While the statute provides for a three-day right of rescission upon receipt of the packet or certificate, it does not provide a right of rescission upon receipt of an update to the disclosure. So what can you do? When drafting an offer, add language to the contract that mirrors the right of rescission language for the packet or certificate, making it applicable for an update.

Q: The packet or certificate was hand-delivered and the agent asked me to sign a receipt for it. I always recommended that my Purchasers not sign the “Purchaser’s Acknowledgement of Receipt […]” (forms K1126 for POA and K1025 for Condo) because it states that the packet or certificate was complete when received and there is not time to review the packet for completeness when delivered. Must my client sign the receipt?
A: NVAR published updated versions of these forms which state that when the purchaser signs the receipt, he only agrees that the package received should contain all the statutorily required disclosures. The forms no longer affirmatively state that the packet or certificate is complete.  

As for the obligation to sign the receipt, while the Code places the burden on the sender to prove delivery for a Notice of Cancellation, it does not do so for delivery of the packet or certificate. The statute does not require a signed receipt for the hand-delivery of the packet. The statute requires a receipt only when the packet is delivered by electronic means. Delivery by United States mail is deemed to have occurred within six days after the postmark date. 

Q: What can we do if an association or management company isn’t following the law?
A: One of the more significant changes in the 2007 law was the establishment of a Common Interest Community Board. This Board was established to regulate management companies and their supervisory and managerial employees. The Board will also receive complaints against associations for alleged code violations. 

If the association has a formal complaint process established, you may be required to adhere to that process before initiating action through the CIC Board. You would also need to use the association’s own complaint process if the violations involve policies that are not governed by Virginia Code, such as association rules or architectural guidelines, as these do not fall within the jurisdiction of the CIC Board. 

If you have questions about a complaint or whether your situation qualifies for CIC Board action, contact the office of the CIC Board Ombudsman at 804.367.2941, CICOmbudsman@dpor.virginia.gov or visit http://www.dpor.virginia.gov/CIC-Ombudsman/.

Sarah Louppe Petcher is NVAR's General Counsel. Lisa Vierse May is the NVAR Government Affairs Director.