Quick Answer
Yes, unpaid HOA assessments can delay or stop a closing if the association has a lien or payment demand that must be resolved before the title insurer will issue a policy that does not except the unpaid amounts.
HOA dues and assessments are a common source of title issues. The amounts involved can be surprisingly large, and disputes between sellers and their associations can complicate closings.
Why Can the Balance Get So Large?
An HOA may claim a balance far exceeding just the monthly dues. Consider this example:
- Six months of unpaid regular dues: $600
- A special assessment for roof repairs: $4,000
- Late charges: $300
- Collection fees: $1,500
- Attorney fees for collection: $3,000
Total claimed: $9,400
The seller may not expect such a large amount, especially if they think only the monthly dues are unpaid.
Can It Be Paid at Closing?
Often, yes. The HOA provides a payoff letter or estoppel certifying the amount required to bring the account current. This amount is collected from the seller's proceeds and disbursed to the HOA at closing. The title company may require the HOA to provide a release of any filed lien. For more on how this works, see how liens are paid at closing.
What If the Seller Disputes It?
If the seller disputes the HOA balance, time becomes critical. Resolving HOA disputes can take weeks or months. If the transaction is on a tight timeline, the seller and buyer may need to negotiate how to handle the disputed amount. Options include setting aside funds in escrow, obtaining a conditional release, or the seller paying the disputed amount under protest and seeking reimbursement afterward.
WHAT SHOULD THE SELLER DO?
Request an HOA estoppel or payoff letter early in the transaction. Do not wait for the title company to request it. If you know there are unpaid amounts, discuss them with your real estate agent and title company immediately.
FAQs
Can HOA dues be prorated at closing?
Yes. Prepaid or unpaid HOA dues are typically prorated between buyer and seller on the settlement statement based on the closing date.
Does my purchase contract address HOA dues?
Most standard purchase contracts include provisions about HOA assessments and which party is responsible for certain amounts. Review your contract carefully, as some contracts limit the seller's obligation to regular assessments only, while others include special assessments.
Can the HOA prevent me from closing even if I'm the buyer?
The HOA's claim is against the seller, not the buyer. However, the title company will likely require resolution before issuing a policy that does not except the HOA's claim. This can delay the buyer's ability to close on time.