Financial

Association Estoppel Payments

They can take a while, they can be expensive, and they are required whenever there is an association governing the property.  Often we are seeing associations requiring up front payment for them.  When prepayment is required, the timing of ordering an estoppel letter can be extra tough.  The parties want to get it ordered in time for closing, but not so early that it has to be updated again prior to closing, which can sometimes result in an additional charge.  If ordered too late in the process, a rush fee (and sometimes a “super” rush fee) may be required.  Finally, there is of course the concern that the deal will fall though and someone will be left out of pocket for the prepaid estoppel fee.  These concerns have made estoppel payments an area of conflict, and there is often confusion over who should be making an estoppel payment or prepayment.

Pursuant to both the Residential Contract for Sale and Purchase and the “AS IS” Residential Contract for Sale and Purchase, the payment of the estoppel fee is the Seller’s responsibility.  The estoppel fee is not to be confused with an application fee or an association transfer fee, which are the Buyer’s responsibilities.  Additionally, it is the responsibility of the Seller to ensure that the estoppel letter arrives in time for closing.  This means, if the Seller enters into a contract to sell their property with a very quick close date, the Seller will be responsible for paying any applicable rush fee that would be needed to receive the estoppel letter in time for closing.  If a Seller would like to delay closing so that they do not have to pay a rush fee, that can only occur if both Seller and Buyer agree to extend the closing date.  If this may be a concern for your Seller, the cost and turnaround time for estoppel letters issued through the Seller’s homeowners or condominium association should be investigated prior to entering into a contract for sale.

In the event that an estoppel fee is pre-paid and the closing does not occur, unfortunately the Seller is not able to recoup “Seller” paid estoppel fees per Chapter 720, Florida Statutes.  Due to this risk, it is important to balance the timing of prepaying and ordering an estoppel letter to minimize the risk of out-of-pocket expense and still ensure that the estoppel letter will be received in time for closing.  This process can be helped by working with an experienced closing agent on your transaction and encouraging your Seller to consider the process of ordering an estoppel when considering accepting an offer with a quick closing date or with contract contingencies that do not expire until very near to the closing date.

Click below to pay for an Association Estoppel Letter