A Practical Guide to HOA Estoppel for Title and Escrow

An HOA Estoppel is a part of the resale package that a Homeowner Association (HOA) is legally required to provide to Buyers. This document is crucial in the real estate transaction process as it helps ensure that the property is free from any liens or encumbrances before the sale is finalized. 

Title and Escrow companies often have to order the Estoppel and other documents from HOAs on behalf of Sellers. However, obtaining an HOA Estoppel can be a daunting task. There are numerous steps involved, and the process can take hours and hours of chasing, tracking, and coordinating.

To help Title and Escrow companies navigate these complexities, this guide will provide an overview of what an HOA Estoppel or Estoppel Certificate contains, who needs it, how to order it, and what to watch out for during closings. 

What is an HOA Estoppel?

An HOA Estoppel is one of the governing documents that HOAs use to verify the current financial and legal status of a property. Some of the common names for Estoppel include Estoppel Certificate, HOA Payoff Statement, Resale Certificate, Resale Demand, and others. 

The Estoppel states whether the current property owner (the Seller) has been paying the HOA fees and whether there are any outstanding dues and violations, along with providing the HOA’s financial statement. The Estoppel also shows new Buyers any/all additional fees (move-in charges/capital contribution/transfer) that need to be paid to the association and/or the property management company.

HOA Estoppel Names by State

Estoppel has many other names based on the state of residence. Curious? Here is a list of all the ways Estoppel is named in states across the US.

Who needs an HOA Estoppel?

HOA Estoppel is used to protect both the Buyer and the Seller of a property during a transaction. For the Buyer, it ensures that the property is in good standing with the HOA and that there are no outstanding balances or fines. For the Seller, it ensures that they will not be liable for any unpaid HOA fees after the sale. The Estoppel also provides a comprehensive overview of the HOA’s financial and legal status which could be helpful to investors. 

Ordering an Estoppel for closing also benefits the HOA. By receiving an Estoppel request, the HOA is informed of the pending sale (which means a new member). And in case a lawsuit occurs later, the Estoppel protects the legitimacy of the property purchase.

Understanding the HOA Estoppel Fees

The fees described in an HOA Estoppel can vary depending on the HOA and the state or locality of the property. 

Some examples of outstanding balance fees included in the HOA Estoppel Certificate are:

• current owner’s balance due (violations, outstanding fees, etc.)
• upcoming fees and special assessments
• frequency of the regular assessment
• membership fees for amenities, facilities, etc.
• total assessment amount
• the penalty for delinquent assessments

Additional fees are charged for transferring the property to the new owner, such as move-in charges and capital contribution. 

• Move-in charges are fees that may be required by the HOA when a new owner moves into a property. These fees can include charges for things like gate access, community amenities, and other services provided by the HOA. 
• The HOA transfer fee is a one-time fee that occurs when a property is transferred from one owner to another.
• Capital contribution is also a one-time fee, usually required from new members and utilized by the HOA for capital improvements and maintenance within the community.

There are also fees associated with obtaining an HOA Estoppel Certificate that can range from a few hundred dollars up to $500. These fees can include charges for administrative costs, document preparation, and processing fees. Some HOAs may also charge additional fees for rush processing or expedited delivery.

Ordering the HOA Estoppel at closing

We all know that obtaining HOA documents is time-consuming, to say the least. There are countless follow-ups with the HOA, the property manager, and the Seller. Chase time alone can derail up to 25% of an Escrow Officer’s work week.

In contrast, ordering Estoppels through InspectHOA is simple. Just provide a property address and a deadline, and we’ll return your HOA docs on time, every time.

HOA Estoppel turnaround time

HOAs have a legal obligation to provide the Estoppel Certificate by a certain deadline (depending on the state). On average, it’s 15 business days but you can often pay an additional rush fee to get the Estoppel before the deadline. Some examples of state-imposed deadlines for HOAs are:

• In Florida, the Estoppel must be issued within 10 business days after receiving a written or electronic request
• In Colorado, 14 business days
• In California, 10 business days
• In Massachusetts, 10 business days

What to watch out for when ordering an HOA Estoppel

Acquiring the Estoppel from an HOA can be a frustrating, time-consuming exercise for Escrow. The most common challenges Escrow Officers face when ordering the HOA Estoppel for closings include:

• Difficulty in identifying an HOA, finding contact information, and obtaining the Estoppel on time.
• Lack of standardization in the HOA documentation and ordering process and the risk of outdated information.
• Lack of clarity regarding the exact fees and other costs associated with the Estoppel.
• Transaction deadlines that can lead to $$$ rush fees.
• Costs of employees’ time spent on HOA search and outreach, as well as dealing with payments and refunds.

Leave the HOAs to InspectHOA

We can help you manage all the risks associated with dealing with HOAs and make sure the Estoppel Certificate that you’ve received is exactly what you need.

By partnering with InspectHOA, you never have to deal with HOAs again. You can focus on your work and your clients, we’ll take care of identifying, ordering, paying, receiving, and processing your HOA documents.

We know HOAs in and out. Leading Title and Escrow companies trust us to improve their HOA documents acquisition process. We deliver HOA documents on time, every time. Additionally, we:

• handle all HOA interactions and issues,
• digitize and summarize all HOA documentation,
• extract the key closing information and transform it into a language that is easy to understand,
• uncover all hidden HOA fees and compare them to the average property in the country,
• pay for the documents upfront

Check out our full process here OR Test it out for yourself and get your first 2 orders for FREE: