HOA Due Diligence

Buyer Due Diligence

Excerpted from a posting by Zachary Levine, JD and Donie Vanitzian, JD – 2014 

Buyers should request a minimum of 24 months of signed homeowner association minutes. Twelve months of minutes is inadequate especially if any minutes are sparse or in “draft” form or unsigned, or meetings were infrequent.

Buyers should ask to attend at least three homeowner association board meetings.  A board might be on its best behavior for that first meeting, but by the third meeting there might be a different picture of what it’s like in that development.

Walk the grounds during the day and evening, look for items of disrepair.  Then request the most recent minutes documenting discussion of those items to ensure the board is acting promptly and repair is scheduled.

Smart buyers ask for homeowner association documents before writing an offer.

Once signed, that offer becomes the parties’ escrow instructions. And once the contract is accepted and escrow has opened, it could be difficult modifying those instructions. It makes sense that buyers are performing due diligence prior to making offers.

The transfer documents that should be requested:

  • Age restrictions, if any
  • Annual budget report/Pro forma, and reserve study
  • Approved changes to assessments
  • Articles of incorporation or a statement that the association is not incorporated
  • Assessment and reserve funding disclosure summary
  • Assessment enforcement policy
  • Bylaws
  • CC&Rs
  • Emergency assessment
  • Financial statement review
  • Insurance summary
  • Minutes of regular board meetings conducted over the previous 12 months, if requested. Make sure to ask for 24 months.
  • Notice(s) of violation
  • Operating rules
  • Other unpaid obligations of seller
  • Preliminary list of defects
  • Regular assessment
  • Rental restrictions, if any
  • Required statement of fees
  • Settlement notice regarding common area defects
  • Special assessment

Buyers should understand they are not limited to these transfer disclosures. In performing due diligence, buyers should ask for whatever they feel is necessary to make an informed decision.

Zachary Levine, partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295.

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1 Response to HOA Due Diligence

  1. Cynthia says:

    Cynthia on December 2, 2014 said on http://hoaowners.org:
    Another brilliant, informative and credible blog post by Donie Vanitzian. Donie Vanitzian is probably one of the leading HOA experts in America, in my opinion and years of experience advocating for HOA homeowners, HOA homeowner protections and HOA homeowner rectification from the range of abuses and criminality inflicted upon innocent homeowners by abusive HOAs, and some HOA attorneys, or other accomplices in these homeowner legal abuses and property thefts. I believe this entire blog is factual and truthful and any homeowner buying into an HOA in any state should read it and learn from the information offered. State laws vary on disclosure, but that doesn’t mean if another state doesn’t have these same disclosure laws, a prospective buyer can’t ask for more information than is required by that specific states laws.
    Due diligence is really all a prospective home buyer can do when considering buying into an HOA with a mandatory association burdened property.
    My concern is the legitimacy of the documents they may receive and if the courts; state, or locale where they are purchasing, will acknowledge the communities documents and the homeowners rights. The most horrific HOA abuses are to innocent homeowners, who owed no monies, broke no by law, rule, or regulation. They did absolutely nothing to deserve being victimized and their homes stolen. They are/were bill paying, community minded, honest homeowners, who questioned an abusive HOA board, or stumbled over criminality on-going within an HOA board. The communities documents and all the due diligence a prospective home buyer can do means absolutely nothing when legal systems and the courts are rigged for the perpetrators of these crimes, like in Monroe County, Pennsylvania, in my experience. Prospective HOA home buyers should go to the court house and check the civil filings these groups and their attorneys have filed and how many homes they have taken. This will give you a clue. Don’t believe a word the HOA board, or attorney may have in relation to these cases, because they are going to make the victimized homeowner appear to be a dead beat. Nothing can be further from the truth. They have made a ton of money stealing their homes. Sure, there are dead beats out there, but these abusive, and I believe many times criminal HOA boards and their HOA attorney, will do to you what they have done to others who are/were innocent, honest and unsuspecting, and the courts will allow them to because they can! It doesn’t matter if there are laws, CC&R’s and the innocent homeowner has done nothing, or owes nothing. They “allege” and your home, equity and finances are stolen, while you are being dragged through the most horrible, dangerous, threatening, fraudulent, secretive, lack of due process and illegal, legal system imaginable. And, yes these “legal systems” and “courts” are in America. What we need is a directory of the corrupt courts, judges (past and present), HOA attorneys and HOA boards (all members), and other associates, in the USA for prospective HOA home buyers to be able to check before buying.


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