If you are a homeowner, board member, or work closely with a Homeowner’s Association (HOA), you might have heard of an estoppel letter. But what is an estoppel letter from an HOA?
An HOA estoppel is a document that encapsulates and verifies certain information about a homeowner’s account within their HOA. Details of what the letter includes will vary from account to account, but usually covers topics such as, the amount of outstanding HOA fees, any part due amounts, the statues of the homeowner’s account, and any dues or special assessments that have not been paid.
For the buyer, requesting an estoppel letter will provide a clear picture of potential financial obligations, including association dues or special assessments for upcoming projects. Estoppel letters also contain any outstanding balances the current homeowner may have, so that the buyer can be aware, before purchasing the property.
The lender also benefits from an estoppel letter. This is because the letter will provide any information the lender would need when considering closing costs for a sale. Lenders also need to know whether the sale meets the legal obligations of the HOA.
The HOA uses estoppel letters to protect themselves from any potential lawsuit that could occur over financial disputes with a homeowner. Estoppel letters show evidence of the legal agreement between the HOA and the buyer at the time of the sale. Because buyer would have had the information to any account details before purchasing a property, the estoppel letter takes any blame off the association.
There are also benefits for the seller when requesting an estoppel letter. Requesting the letter before a sale, or before refinancing a property, allows the current owner a chance to reconcile any outstanding balances with their HOA.
The aim of an estoppel letter is to give third parties an accurate description of the current homeowners account with the HOA. Estoppel letters protect potential buyers, lenders, the association, and the current owner by giving a clear picture of the financial obligations associated with a property.
Knowing what an estoppel is can be valuable information for any potential buyers and lenders; but how is an estoppel letter requested and obtained from an HOA? Typically, estoppel letters are requested by the current homeowner who will need to make a request in writing to the HOA. The homeowner will need to include their name, address, and contact information, as well as the property address and reason for the request. Some HOAs might require a fee in order to obtain an estoppel letter.
Whether or not a homeowner’s association requires an estoppel letter, it is always smart to obtain one to protect the interests of all parties involved. Estoppel letters serve many functions, and it is always recommended that the homeowner requests one from their HOA before selling or refinancing their property.