What is the Florida Estoppel Letter in Florida
In Florida, the HOA estoppel letter certifies how much the current homeowner or condo owner owes to the HOA in fees and other charges as of the date specified in the letter. These may also be referred to as an estoppel certificate, HOA status certificate, HOA closing statement, or current dues letter.
An estoppel certificate is a signed statement typically from a tenant or mortgagee certifying that certain facts are correct in regards to a property or legal entity. The Florida legislature passed a bill in 2017 issuing various changes to the estoppel certificate such as requirements and fees. It basically lays out the property owners who live with in a homeowners association must contact the Association to get this estoppel letter anytime they sell their home or condo.
This estoppel certificate or letter is used to facilitate the closing by providing a layout of all the fees and assessments that a seller may owe to the Association. Buyers are also liable to the previous owner for dues and assessments owed to the Association. Any time a buyer purchases property within a condo association or homeowners association (HOA) that buyer must be informed of what is owed so that the amount may be collected from the seller and applied at closing.
The general idea is that any Association owners are liable along with the previous owner for any property-related debts and this estoppel letter is used to put the amount and the due date in writing. It's generally used to prevent owners from reneging on anything at a later date and offers critical information regarding any relationship to a third party, a.k.a. HOA or a third party looking to purchase the property. This could also include a lender who will have secured interest in that property. Prior to closing, the HOA or the HOA management company, will need to supply an estoppel letter to the bank or lender to show if there are any delinquent balances.
In most cases, sellers are typically current in their association dues and assessments. This really comes down to what the seller currently owes. In 2017, the Florida legislature put a cap on the maximum amount that an association may charge for the preparation and delivery of an estoppel certificate. These fees are as follows:
For non-delinquent accounts, the HOA may charge no more than $250.
For delinquent accounts, the HOA may charge up to an additional $150.
If the estoppel certificate is expedited, the Association may charge an additional fee of $100.
All certificates and letters must be written in a way that is understandable to both the buyer and the seller and provide appropriate information needed to close the transaction. These certificates are effective for 30 days from the date of delivery. Any outstanding balances including current HOA fees, delinquent fees, interest payments, special assessments, and attorney fees can be included in an estoppel letter. This legally binding document cannot be altered once it has been submitted to the lender and the HOA cannot add any newly discovered debts once submitted.
Why have an estoppel letter?
The purpose of an estoppel letter is to protect any new buyer from undisclosed financial obligations to the HOA left by a previous condo or homeowner. These financial obligations can be included in negotiations to determine closing costs but the new buyer is not responsible for paying any fees that the current owner is responsible for even if the estoppel is incorrect once this certificate has been submitted. If the buyer does not receive an estoppel letter and then closes on the property, they could be responsible for any and all fees that the previous owner did not pay, which is why an estoppel letter is so critically important.
What is included in an estoppel letter?
HOA's are required to create their own letters or forms that include specifics on the purchase and the dues owed. They must follow any bylaws, covenants, and conditions set forth if they exist but they will generally include the date of issuance, the Association's name and contact information, the owner's name and contact, property description, and itemized lists of any fees owed to the Association at the time the letter is written, the date for which the balance will remain unchanged, payment instructions, and authorized signature.
Does the buyer have to request an estoppel letter?
Typically, the title or escrow company handling the closing will request an estoppel letter from the HOA. The Association is required to provide the letter and an authorized representative from the Association must complete and sign the document within a given time frame. The letter must be delivered to the requested party within 10 business days after receiving a written or electronic request. (Even if it is a written request, Florida rules require a designated email address for receipt of a request for an estoppel letter.)
What if the seller doesn't owe any fees?
Even if a condo owner or homeowner has no outstanding balances to the HOA, an estoppel letter must be given to the party that requests it and the fee for the estoppel letter, typically between $100 and $250, must be paid.
Bottom line: before any new owner moves into an association, either a condominium building, complex, subdivision or development, an estoppel letter must be obtained by the Association stating any and all fees currently do. This is to inform the buyer of any delinquent fees on a property before closing. No buyer wants to carry over any delinquent fees from a previous owner.
For more information on estoppel letters in Florida or if you have specific questions on certain fees and requirements when buying a home or condo in Florida, please don't hesitate to contact me below.