With so many other subjects related to condominium and homeowners’ associations consuming so much bandwidth these days, it was not surprising to learn that a community association client of mine was not aware that the Florida Statutes address in detail association estoppel letters. If your association’s board or directors or property manager has been completing fill-in-the-blank forms generated by title companies or closing agents and/or has been sending account ledgers to persons involved in real estate transactions in lieu of more nuanced financial disclosures, then this article is for you. It is important to note that this article does not address what is commonly referred to as “lender questionnaires”. Lender questionnaires were addressed in a previous CUP article.
As a starting place, “estoppel” is a legal term of art. In the context of a real estate closings, professionals handling transfers of property in condominium or homeowners’ associations need to make sure that associations have been paid amounts due for assessments and related charges through the date of the closing. When an association makes a representation that is relied upon to close a real estate transaction, “estoppel” refers to the legal effect of the association being required to honor that representation later.
In conversation, the written communications associations make in anticipation of real estate closings are often called “estoppel letters”. In Chapters 718 and 720 of the Florida Statutes, they are called “estoppel certificates”. The terms are interchangeable. In 2017, to curb perceived abuses and to provide regulation to a part of the community association industry that lacked it, Fla. Stat. §718.116(8) and Fla. Stat. §720.30851 were overhauled. The result is that associations now have ten (10) business days to respond to requests for estoppel information by providing an estoppel certificate in a format that substantially conforms to a robust form contained in the statutes.
The statutory estoppel certificate form calls for the disclosure of basic information about the property that is the subject of the real estate transaction, assessment information (including any delinquency information), and other information (including information about any “open violations” that have been noticed to the owner). Associations are also given the privilege, but not the obligation, to supply additional information in the estoppel certificates they provide. The statutes place limits upon the fees that may be charged for providing estoppel information, and the DBPR’s website contains the current limits upon these fees (adjusted for inflation). Associations are also required by statute to disclose on their websites the name and contact information of the person who they have designated to receive and process estoppel certificate requests.
Notably, many professionals who handle real estate transactions did not respond to the 2017 statutory changes by modifying how they request and collect estoppel information from associations. As the result, after an initial surge of interest in this subject and compliance by associations, as time progressed and as other association matters crowded out estoppel issues, many associations reverted back to filling out non-compliant title company forms and sending out accounting ledgers in lieu of providing assessment information as specifically prescribed by statute.
In addition to complying with applicable law, use of the estoppel certificate form that emerged in the 2017 statutory changes has benefits for associations, and the statutory privilege to provide “additional information” gives associations who use the form an opportunity to make important representations that do not neatly fit within the categories of information typically asked for by title company forms. Associations are encouraged to speak with their legal counsel about how to comply with the estoppel certificate statutes and about how to derive all available advantages from use of the statutory form.
