A condo resale certificate plays an essential role in the unit sale process. Without this certificate, buyers would have no way of knowing about the association’s operations and any unpaid amounts attached to the unit. In Texas, there are certain requirements that condo associations must follow when it comes to resale certificates.
What is a Condo Resale Certificate?
A condominium resale certificate is a document that summarizes the association’s financial health, rules, and any attached outstanding fees. It offers complete transparency to the buyer, thereby protecting them from inheriting hidden debts. Moreover, with a resale certificate, buyers can evaluate whether the condo association is the right fit for them before the sale closes.
Is a Condo Resale Certificate Required in Texas?
According to Section 82.157, when a unit owner wishes to sell their unit, they must provide the buyer certain documents before transferring ownership. These documents include the CC&Rs, bylaws, rules and regulations, and an official resale certificate from the association.
As per Texas law, the resale certificate for condo unit sales must be no more than three months old when it is given to the buyer. This ensures that the buyer does not receive outdated information.
What Does a Resale Package for Condo Include?
A condo resale package provides the buyer with important information about both the unit and the association itself. Here are the documents that a resale package must contain.
1. Restrictions on Selling
The resale package must inform the buyer of any restrictions on transferring the unit. This includes a right of first refusal.
2. Dues and Money Owed
The certificate must list any regular dues, special assessments, and unpaid dues or fees that the seller owes. These are the amounts attached to the unit, which means the buyer will be responsible for them moving forward.
That said, if the resale certificate incorrectly states how much the seller owes the association, the buyer is only responsible for the amount shown. The COA can’t later require the buyer to pay additional delinquent amounts that it failed to include in the certificate.
3. Upcoming Major Expenses
If the association has any major capital projects within the next 12 months, the buyer must know about it. This information must appear in the certificate.
4. Reserve Funds
Resale packages must include information on the association’s reserves, including how much it has in its reserve fund and if any of the money has already been earmarked for specific projects. It is also best to include a copy of the most recent reserve study.
5. Lawsuits
The buyer has a right to know if the association is embroiled in any legal issues. The certificate must state whether the condo has any unpaid court judgments against it or is currently involved in any lawsuits.
6. Insurance
Resale certificates must detail the insurance coverage the association provides for unit owners. This way, the buyer can obtain the proper coverage for their own unit.
7. Unit Violations
Buyers must know if there are any violations relevant to the unit they are purchasing. This includes any alterations or improvements to the unit or its limited common elements that violate the governing documents.
8. Government Code Violations
Resale packages must also dictate whether the association has received notice from a government agency about health or building code violations that involve the unit, its limited common elements, or another part of the condominium.
9. Lease Information
If the condominium sits on leased land, the certificate must explain how much time remains on the lease and if the lease can be renewed or extended. Buyers have a right to know if they can potentially lose their unit or have fees go up.
10. Management Contact Information
The resale certificate must include the name, address, and phone number of the association’s management company or condo manager.
11. Association Financial Information
Buyers should inspect the association’s financial health. To support this, the resale package must include the condo association’s current operating budget and balance sheet. Other financial statements are also welcome.
12. Transfer Fees
Finally, the resale package must include a complete list of every fee related to the sale. These include the amount, what the fee is for, and who will receive the payment.
When Should a Condo Provide the Resale Certificate?
Once the seller makes a written request, the association has 10 days to provide the resale certificate. An officer or authorized representative must sign and date the certificate.
According to Section 82.156, if the buyer doesn’t receive the resale certificate before signing the purchase contract, they have a right to cancel the sale. That said, they don’t possess this right indefinitely.
Texas law states that the buyer must cancel before the sixth day after one of the following happens, whichever comes first:
- The buyer receives the resale certificate, or
- The buyer signs a written waiver agreeing to proceed without the resale certificate.
Additionally, if the association failed to provide the certificate on time, the seller is not liable.
What Happens if the Condo Fails to Provide a Resale Certificate?
If the association fails to provide the resale certificate within 10 days, the seller may instead give the buyer a sworn affidavit. This affidavit must state that they requested the certificate and the association didn’t provide it on time. The seller and buyer may also agree in writing to proceed without the condo resale certificate.
Furthermore, if the association provides the wrong information, the seller isn’t responsible for it. The sale still remains valid even if the resale certificate never comes.
Finally, the association generally isn’t liable if it fails to provide the certificate. The only exception is if a board member or manager intentionally refused to provide it or was grossly negligent.
How Much Does an HOA Resale Certificate Cost?
The cost of a condo resale certificate can vary depending on the association. In Texas, Section 82.102 gives associations the power to charge a fee for resale certificates.
That said, there is a limit. This fee must be reasonable and necessary to prepare the resale certificate. According to Texas law, condo associations may not charge a fee more than $375.
A Critical Step
A condo resale certificate promotes transparency when transferring unit ownership. When a seller requests this certificate, condo boards must comply. This ensures that the buyer gets an open and welcoming start to their new life in the community.
Graham Management offers exceptional condo management services to Houston communities. Call us today at (713) 334-8000, request a proposal, or contact us online to learn more!
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