Homeowners vs. Condo Associations: The Similarities

ORLANDO, Fla. – With over 1.5 million condominium units (condos) in Florida, and over 3.71 million homes in homeowners’ associations (HOAs), most of our members have helped prepare contracts that address issues associated with association rules. There are important contract riders associated with each type of community, and we’ll look at two specific riders – the CR-6x A Condominium Rider and the CR-6 B Homeowners’ Association/Community Disclosure.

We’ll look at some similarities in this article. For a look at the the ways they're not the same, see Homeowners vs. Condo Associations: The Differences

Similarity 1: Disclosures mandated by statute

Both riders contain disclosures mandated by Florida law. These statutory disclosures are quite different in how they work, so the main similarity is that if the seller neglects to include the statutory language in their contract – or deliver it to the buyer after a contract is signed and wait for a review period to expire – the buyer is allowed to void the contract until closing. The condo disclosure comes from Section 718.503, Florida Statutes, and the HOA disclosure comes from Section 720.401, Florida Statutes.

The mandatory language in both statutes is written IN ALL CAPITAL LETTERS, and the drafters of the rider kept the ALL CAPS formatting in place. It’s interesting to note that a seller should leave this mandatory ALL CAPS language alone in both instances, but that anything outside of this ALL CAPS language remains negotiable, should the parties want to modify other aspects of the condo or HOA rider.

Similarity 2: Both Riders go beyond the minimum statutory requirement

Both riders expand on the statutory language’s minimum requirements and address various issues that could impact transactions. For example, both include room for a seller to disclose whether association approval is required. If required, then these sections describe what both sides are obligated to do, like initiate the approval process (seller) or show up for an in-person interview if required (buyer). They both conclude with a deadline to get the approval. If the deadline expires without association approval, then the contract will terminate, and the buyer is entitled to a return of the deposit.

Both riders also contain a detailed section that allows a buyer and seller to negotiate whether certain special assessments that can be paid in installments will be paid in full before closing, or whether a buyer will pay installments due after closing. These are nuanced sections that use slightly different wording, so the parties should pay close attention if special assessments that meet these descriptions exist.

Similarity 3: Both riders disclose assessments and fees

Both condos and HOAs have mandatory assessments. At a minimum, there will be some amount of general assessments. There may or may not be special assessments or additional fees.

Both riders allow the seller to disclose the amounts of these assessments and fees to the buyer. For both condos and HOAs, the seller should be hyper vigilant to ensure these amounts are accurate. It seems best for the seller who pays the assessments and fees to confirm the amounts, but if anyone – like one of our members – helps a seller research the amounts, that helper should also be extra careful to calculate the correct amount because both the seller and the researcher could share some liability if it’s not right.

Similarity 4: Both reference a buyer’s right to void the contract

Both riders describe certain rights a buyer might have to void a contract. While there are significant differences in when and why a buyer can void the contract, both mention such a right. Although we’ll cover differences in the next article, it’s worth pointing out that if the HOA rider is completed and attached to the contract, the buyer does NOT have a right to void the contract.

Similarity 5: Both warn the buyer to research

Both disclosures reference rules, restrictions, and governing documents in general terms. They encourage (but don’t obligate) a buyer to carefully read those documents.

This is an interesting note to end on. We would encourage any buyer to spend time investigating what can go wrong with associations, and to carefully weigh the pros and cons of buying a property saddled with an association vs. one without. We would also highly encourage buyers to dig into the details of any specific association’s history. Has it been fiscally responsible so far? How are the reserves? What are the rules? How often do the rules change? How aggressively does the association enforce the rules? Do neighbors get along or fight? Is there any litigation pending? How often does this association foreclose on owners in the neighborhood? And so on.

There are some things a buyer can’t predict, like how bad it could get if one or more evil tyrants manage to secure leadership in the association, or whether hidden fraud or theft currently exists in the association. However, there are plenty of things they can do to at least rule out issues they could uncover through basic research.

Joel Maxson is Associate General Counsel
Note: Information deemed accurate on date of publication

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