Here is an email I received. It relates to a concern about some language in proposed Amended and Updated Governing Documents.
“Thank you for your blog and newsletters. Our association is in the process of amending our CC&Rs. … One of the provisions I oppose in the proposed CC&Rs is a new requirement that an owner selling his or her unit must give notice to the association of their intent to sell or of their proposed sale of their unit. I contend that the earliest such notice that should be required is not until an escrow is opened or a contract of sale of the unit has been made. Otherwise, the information could be used to the advantage of any board member who happens to be a real estate sales person. The President of the Board is a Realtor. We have not had explained to us members any reason for this specific requirement being necessary and therefore, I find it to be unreasonable.”
First of all I will say that every set of documents I have written in the last 25 years at least has a requirement that an owner notify the board if there is a sale of the property. But the last 10 years or so that provision has been upgraded because Boards have more obligations with regard to sale of a Unit under California law. New requirements have been added over the years. Realtors are now supposed to request documents much earlier than when a home goes under contract. And Boards are expected to respond quickly to requests.
Here is the portion of the law that deals with the timeliness of these disclosures. You can look up the entire law at www.ca.gov. Navigate to the California laws.
Here is what is pertinent to this concern about the HOA having the information:
- DISCLOSURES REQUIRED IN SALE OR TRANSFER OF A CID PROPERTY
(a) The owner of a separate interest shall provide the following documents to a prospective purchaser of the separate interest, as soon as practicable before the transfer of title or the execution of a real property sales contract, as defined in Section 2985:
(1) A copy of all governing documents. If the association is not incorporated, this shall include a statement in writing from an authorized representative of the association that the association is not incorporated.”
Notice that the law says “as soon as practicable BEFORE the transfer of title OR the execution of a real property sales contract.”
It is easier for HOA boards and management companies to provide information more quickly if they are aware a request may be coming in.
The list of disclosures is long. There is a lot of information that has to be provided with regard to any sale. And the Board has to provide a Good Faith Statement of Fees upon request as well. The laws require that the Board (usually handled by the management company though) has to respond to a request for documents that the law requires to be delivered, within 10 days of the request, or there can be penalties.
Now let’s talk about the idea of having a realtor on the Board. It is a good thing?
It can be, if the director is responsible and doesn’t take unfair advantage of the information available.
Realtors tend to be knowledgeable about property and should have a higher level of knowledge and respect for the conditions that occur on property, inspections, the integrity of property restrictions If they are not knowledgeable and honest about these things they are likely to hear from dissatisfied buyers or sellers. They tend to have an arsenal of contacts and resources available to them.
On the other side, a realtor that sits on a board can take unfair advantage. Sometimes the director will use his or her access to a contact list for members and solicit business. A director might try to seek some advantage if they find out a property is coming up for sale in an association. I have heard of situations where a director even contacted an owner and talked them into selling to the realtor director who turned around and sold the property for a profit.
If the Realtor has been appointed President by the other Directors he must have gained some trust.
I often see that owners become focused on some specific provision in updated documents that are offered for voting. Sometimes it is justified. Sometimes not. Here, we are talking about a provision that is important, and justifiable since there are serious obligations and timely responses required when there is an intent to sell and more importantly when there is a prospective buyer in the picture. It is kind of surprising that a concern like this would arise. When a person offers their property for sale, a FOR SALE sign usually goes up and that is the definitely an early indication of an intent to sell.