Barry Berkowitz: Key fact about estoppel bill: it's bad for homeowners

BILL DAY OLD CORRUPTABLE

Two bills speeding through the legislature, CS/SB 736 and CS/CS/HB 611, are set to change complex and nuanced areas of real estate law. They deal with such arcane things as estoppel certificates and who pays what at real estate closings.

Barry Berkowitz
Barry Berkowitz

Those concepts may be complex to the average reader, so I’d like to frame it in terms everyone can understand: If these bills pass, homeowners’ association dues will go up.

How will they raise homeowner’s fees?

These bills create an artificial cap (Can you say “price fixing?”) on the fees charged by homeowners’ associations for their time and effort in researching and preparing what are known as “estoppel certificates” – which can often be a complicated process. Estoppel certificates are like an account statement of money owed by a homeowner to a homeowners’ association. They help determine how much needs to be paid and by whom.

The bills also require the homeowner’s association to provide this service without payment until the closing – or later – which can be several weeks or months after the service is provided. And if the closing doesn’t occur (or the requesting party decides not to pay), the homeowners’ association may have to go to court to get paid. The bills also penalize associations that cannot provide the certificate within the new, shortened deadline – by waiving payment of the fee.

If these bills pass, homeowners’ associations – and therefore, the homeowners themselves – will be on the hook for a host of fees, dues and additional costs.

And if that happens, literally millions of Florida residents will be forced to cover the costs that should be – and currently are – borne by a seller and a buyer in a private sales transaction. In short, CS/SB 736 and HB 611 will hurt average everyday Floridians and will do so in three distinct – and unfair – ways.

First, when someone is buying (for example) a condominium, and the owner hasn’t paid the association fees, the homeowner’s association must verify the outstanding balance. No problem. This however, often takes time as the actual number can be a moving target (as each month passes the dues/fees will continue to accrue) and sometimes it requires extra time to get an exact figure. The bills in question will shorten that time frame. If the homeowners’ association gets it wrong (thanks to being rushed) the homeowners may be stuck paying the difference – or they may be barred from collecting the correct, but higher, amount.

Second, the bills severely and artificially limit the fees to compile and produce such data – irrespective of the actual costs incurred to figure out the outstanding balance(s). If the actual costs are more than the capped fee arbitrarily picked by politicians, the homeowners are again stuck paying the difference.

Third, the bills allow the party requesting the service to delay payment. Instead of paying at the time service is rendered, the homeowners association only gets paid – if at all –after the closing. This delay will not only cost homeowners money (notice the recurring theme here), but if the fees are not paid, the homeowners will need to seek a court judgment to pay the fees. Who ends up paying for that? You guessed it, the other homeowners in the association.

This last point is especially unfair because if this bad idea were to become law, the homeowners would be the only ones providing a legally required service yet not getting paid until after the home is finally sold. No sale, no payment. This is a lot like someone getting a haircut and not having to pay for it for several weeks, while then forcing the salon to chase down the customer long after the service was provided. Nobody else in this kind of real estate transaction is subject to such unfair practices, nobody except the homeowners.

The issues behind the so-called estoppel bill are complex and are difficult for anyone but real estate attorneys to understand, but the impact of these bills is easy to grasp: if they pass, homeowners will see higher association dues and fees as a direct result of these measures becoming law.

Homeowners’ dues and fees will go up. It’s that clear and it’s that simple.

Barry Berkowitz, CPA is the Managing Director of Mayer Hoffman McCann P.C. an independent CPA firm. Mr. Berkowitz represents a 483-unit condominium association in Florida and can be reached at [email protected]. Column courtesy of Context Florida.

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One comment

  • Diana Ferrer

    April 13, 2015 at 2:23 pm

    Please side with the homeowners’ association, over delinquent absentee owners. Vote NO on HB 611!

Comments are closed.


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