Required Disclosures About Homeowners Associations and Condominium Associations
May 27, 2013
How is a potential homebuyer to know whether the property he or she is interested in is part of a homeowners association or condominium association?
The Tennessee Code, see Tenn. Code § 66-5-201, et seq., provides that a residential real estate disclosure statement must be made with respect to the sale of certain residential real estate in Tennessee. The disclosure statement must be delivered by the seller of the property prior to the acceptance of the real estate purchase contract. Tenn. Code § 66-5-213(b) addresses disclosures that are required where the property is part of a homeowners association or condominium association. This statute provides:
[i]n addition to any other disclosures required in this part with regard to transfers described in § 66-5-201, the owner of the residential property shall, prior to entering a contract with a buyer, disclose in the contract itself or in writing, including acknowledgement, if the property is located in a PUD [planned unit development, i.e., a homeowners association or condominium association], and make available to the buyer a copy of the development’s restrictive covenants, homeowner bylaws and master deed upon request.
It should be noted what this requirement does. It explicitly provides that the seller of certain residential real estate must disclose whether the property is part of a homeowners association or condominium association prior to entering into a contract with a buyer. Further, upon request the seller must provide copies of the CCRs or master deed, as applicable, and the association’s bylaws. Since this is to be done prior to entering into a contract, it effectively gives the buyer control over the situation as he or she may review the relevant documents prior to entering into a contract with the seller. Conversely, it does not give a prospective buyer access to the financial data of the association as the prospective buyer is not a member of the association.
While access to the governing documents of the association tells much of the story of the association, the association’s budget and financial records tells the whole story. Regardless, it is important to know that this law is out there. Members of an association should be aware, prior to closing, of the existence of the association. While they may not understand the implications of membership in an association, they should have been given the opportunity to make themselves aware of its existence.
Tags: association, board of directors, bylaws, CCRs, Declaration of Covenants Conditions and Restrictions, HOA, homeowner, homeowners, homeowners association, laws, non-profit corporation, residential property disclosures, Tenn. Code 66-5-213(b), Tennessee