Failure to Disclose Special Assessments
Common issue that we have come across with is the failure of the Seller to disclose current or pending special assessments in Section 3(c) of the Condominium Rider. In fact, we have found that most real estate agents are not even aware that this section needs to be filled out or that the Seller will suffer dire consequences if it isn’t. Majority of the Sellers as well as their agents believe that if the special assessments have not be officially approved yet, it is not considered “pending” and does not need to be disclosed in Section 3(c) of the Condominium Rider. That belief is grossly incorrect.
The Condominium Rider section 3(c) states following: (i) Seller represents that Seller is not aware of any special or other assessment that has been levied by the Association or that has been an item on the agenda, or reported in the minutes, of the Association within twelve (12) months prior to Effective Date, (“pending”) except as follows: (iii) If special assessments levied or pending exist as of the Effective Date and have not been disclosed above by Seller, then Seller shall pay such assessments in full at the time of Closing.
This language indicates that if the special assessments are imposed prior to the Effective Date, even if Section (c)(ii) is marked for the Buyer to pay the payments due after closing, Seller is still responsible to pay them in full IF the Seller failed to disclose it in Section 3(c)(i). Additionally, potential special assessments that have been an item on the agenda or reported in the minutes of the association within twelve (12) months prior to the Effective Date are considered “pending” for the purposes of Section 3(c) of the Condominium Rider. This means that if the Seller fails to disclose in Section 3(c)(i) that special assessments have been discussed during the meetings, Seller may be on the hook for the special assessments that have not even been imposed yet.
For instance, I recently had a transaction where the special assessments for the 40 year recertification have been discussed at length at several meetings with the homeowners. However, the Seller tried to sell the property before the special assessments were officially imposed and purposely failed to disclose them on Section 3(c) of the Condominium Rider. This could be considered an attempt to conceal by the Florida courts. As such, the Buyer argued that the special assessments must be paid by the Seller or an expected amount of the future assessments must be placed in escrow for the benefit of the Seller.
As such, we strongly recommend disclosing the potential future special assessments. If the seller discloses the possibility of an assessment in the future, then the contract protects the seller if the assessment is eventually imposed post-closing. However, if the seller fails to disclose the possibility of an assessment int eh future, then the seller could be legally liable for the assessment, even if it occurs after closing.
The obvious question then involves a situation where the seller truly had no knowledge of the possibility of special assessment because the seller is not one to attend association meetings regularly. If in fact the special assessments were discussed in the meetings, the seller could be deemed to have knowledge of the assessment, even if they were not at the meeting, did not review the minutes, or did not see the agenda.
Therefore, please be very careful when it comes to disclosing the special assessments imposed or pending in the Condominium Rider. If you have any questions regarding the disclosure, please contact Mila Lopata, P.A. for further information.