The HOA Addendum is the Seller’s opportunity to identify the HOA(s) that govern the property and the amount of HOA fees that will be paid at close of escrow.

It is also the Buyer’s opportunity to make an offer and propose which party, the Seller or Buyer, will be paying which of the HOA fees payable upon Close of Escrow.

Part One: The Seller
The Seller initiates the process by completing page one of the HOA Addendum. Page one involves identifying the Association(s) that govern the Premises, along with the amount of dues and/or special assessments. This section also asks the Seller to disclose the homeowner’s association (HOA) fees payable upon close of escrow.

A. Identifying the HOA Information
Upon listing a property for sale, the Seller should identify all Association(s)/Management Company(ies) governing the Premises. The HOA Addendum includes three boxes for this information. The boxes are as follows: (1) the first box, starting at line 7, is for the HOA governing the Premises; (2) the second box, starting at line 11, is for properties that may be additionally subject to a master association; and (3) the third box, starting at line 15, is included for the rare occasion in which there is a third association governing the Premises.

The Seller should further include in each of the respective boxes the amount of dues owed to the Association(s)/Management Company(ies) and how often those dues are paid (e.g. monthly, quarterly, or yearly). Additionally, if the Seller is aware of any current or pending special assessments, that amount should be included along with the start date and end date for the special assessment.

The Seller can find the above information by reviewing their association billing statement or contacting the Association(s)/Management Company(ies) that govern the Premises.

B. Identifying the Fees Payable Upon Close of Escrow
When listing a property for sale, the HOA Addendum further instructs the Seller to disclose the Fees Payable Upon Close of Escrow. The Fees Payable Upon Close of Escrow are located at lines 17 through 29 and are grouped into categories which consist of the following: (1) Transfer Fees; (2) Capital Improvement Fees; (3) Prepaid Association(s) Fees; (4) Disclosure Fees; and (5) Other Fees. If there is a question as to what kind of fee falls under each of the categories, definitions of the fees conveniently follow each bolded category.

In completing this portion of the HOA Addendum, each association governing the property should be contacted, and the fees charged by each association at close of escrow should be disclosed. If there are fees charged by a third association, those fees should be included in one lump sum under “Other Fees” with an explanation provided.

C. Conveying the HOA Addendum
Once the HOA information and Fees Payable Upon Close of Escrow have been obtained, the Seller is to complete page one of the Addendum and place their signature on line 32. Thereafter, the entire three-page HOA Addendum is to be uploaded to the Multiple Listing Service, if available, or delivered to prospective buyers upon request.

The reason for uploading the HOA Addendum is so that prospective buyers will be able to easily access the HOA Addendum and take note of the Fees Payable Upon Close of Escrow. With this knowledge, the Buyer can make an informed decision as to which fees they are offering to pay as part of their purchase offer.

In the event that the local MLS does not permit the Addendum to be uploaded, or in the event that the listing agent fails to do so, the prospective buyer’s agent should directly contact the listing agent and request that the HOA Addendum be promptly conveyed.

Part Two: Additional Obligations
The second page of the HOA Addendum addresses the Seller’s legal obligation to provide specific information (which is located in the box on page 2) to the Buyer if the HOA has less than 50 units. However, if the HOA has 50 units or more, lines 36 through 39 address the association’s obligation to provide the information to the Buyer.

Part Three: The Prospective Buyer
Prior to submitting their purchase offer, the Buyer should secure a copy of the Addendum in which page one has been completed by the Seller. The Buyer should review the fees disclosed on page one and should then contact the Association(s)/Management Company(ies) to obtain verbal verification of the Fees Payable Upon Close of Escrow. Once the Buyer feels that they understand the Fees Payable Upon Close of Escrow, they are to complete page three of the HOA Addendum, thereby identifying which party pays for which fees. Finally, the Buyer signs the HOA Addendum at line 94 and conveys all three pages of the HOA Addendum to the Seller upon submission of their purchase offer.

Part Four: The Seller
Upon receipt of the HOA Addendum, the Seller decides whether to accept or counter the Fees Payable Upon Close of Escrow as proposed by the Buyer.

If the Seller is unwilling to accept the Buyer’s proposal regarding the Fees Payable Upon Close of Escrow, the Seller has two primary options. First, the Seller can simply reject the Buyer’s purchase offer. Alternatively, the Seller can submit a counter offer to the Buyer that contains the Seller’s proposal for who pays what fees.

This article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal council.