A buyer exploring the complexities of a home acquisition is often in for wild ride. It's a mystery where few should venture alone, where financing and location are important, and where purchasers need to carefully review the seller's "resale disclosure". Without it, "buyer beware" can become a frightening reality.

Resale disclosure means divulging information that any prudent buyer would want to know. Examples:

1. Are there any known structural, wiring or plumbing problems?
2. Does the basement resemble an indoor swimming pool during the rainy season?
3. Is there evidence of lead base paint or other environmental hazard? (Inquiring federal watchdogs want to know!).
4. Was this location ever a "crack" house or drug lab?

Single family house sellers are required to disclose a host of information that may result in buyer back-out. No prudent real estate agent allows a transaction to close without "full" disclosure because it's often the agent that suffers the buyer's wrath for seller omissions.

Unfortunately, resale disclosure is alarmingly absent when it comes to most homeowner association home sales. This is very disturbing considering the substantial liabilities and financial obligations which come with ownership of HOA property. Unfortunately, many real estate agents simply aren't informed and many associations do not maintain the kind of disclosure information buyers need to know.

So what kind of "liabilities and obligations" does an HOA owner have? Example: When a condo buyer gets a unit inspection, good or bad it reveals nothing about the buyer's financial responsibility for all the neighbors' condos and the common area buildings, amenities and grounds as well. If the other units are riddled with dryrot, the buyer will have to pony up a share of the repair costs. A home inspection won't forewarn these problems. If the owner, property manager or board aren't quizzed about known defects, the buyer often won't know until after closing. This invariably results in "Unhappy Camper Syndrome". What should be a happy event turns into a disaster. Avoidable? Absolutely!

HOA homeowners can also be personally liable for lawsuits to which the association is a party. While the association should carry a substantial liability policy, many don't, leaving board members and owners exposed to potentially large personal judgments. Don't you think buyers would like to know about the association insurance and any litigation that is being bandied about? Indubitably!

Here's a Resale Disclosure Checklist that an informed HOA buyer should have to reveal a true and complete picture:

• A statement of any special assessment approved or anticipated;

• A statement of regarding the status of the owner's account;

• A statement of the status of the reserve account for repair and replacement of common area components with useful lives of 3-30 years;

• A copy of the association's current budget, year end balance sheet and income statement for the previous fiscal year;

• A statement concerning any litigation or judgments to which the association is a party;

• A summary of the association insurance policies that includes the insurance carrier(s), types of coverages, policy limit of each coverage and deductible, if any;

• A statement that the unit and its limited common elements are not in violation of the architectural guidelines due to alteration or addition.

• A copy of the current bylaws, declaration, resolutions, rules and regulations and architectural guidelines adopted by the association plus any amendments.

• Approved minutes to past year's Board and Homeowner meetings.

• Newsletters for the past year.

• All information required by regulation.

Some HOAs are reluctant to provide this information even if they have it as it may be incomplete or inaccurate. Most courts have ruled that since the association has no financial interest in the outcome of a sale, it has no duty to disclose.

However, many associations, wishing to be helpful, provide certain information to purchasers and their banks. Ironically, once a disclosure is voluntarily made, courts have found that the information provided must be accurate. Therefore, the association, legally speaking, is better off providing no information than to provide any. To overcome this problem, some HOAs use a custom disclosure form with a "weasel clause" which states something like "This information is believed to be correct, but the lender/buyer should independently verify all information".

The board is caught between a rock and a hard place: If information is provided to the buyer that causes the sale to fail, it may be sued by the seller to whom it owes fiduciary duty. If it fails to disclose information to the buyer that might have prompted the buyer to back out, the new owner may attack like a rabid pit bull because of omission or concealment. To navigate this fine line, some associations provide information only if the seller and buyer authorize the release of it and agree to indemnify (protect and defend) the association for any information it releases. If the buyer and seller don't agree, no information is forthcoming. Further, information provided to lenders is on an association form and conditioned that the information will not be disseminated to third parties.

Thus, the quandary: How does a HOA buyer get the "straight scoop"? It's wise to talk with several knowledgeable residents about what's going on. Knocking on a few doors will often produce a huge amount of insider information in very little time. Since these folks don't have a direct interest in the sale, they are usually quite candid.

In the final analysis, the better informed a buyer is before closing, the better ownership experience will result. Uninformed buyers become naturally disgruntled when post sale revelations hit. The next time a "For Sale" sign sprouts up in your community, make sure both the agent and owner are prepared with the association's Resale Disclosure Checklist information.

For more information on this subject, see www.Regenesis.net.

Published: August 8, 2001

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Richard Thompson owns Regenesis, a management consulting company that specializes in condominium and homeowner associations. He is a nationally recognized expert on HOA management issues. Regenesis publishes The Regenesis Report, a monthly newsletter for HOA boards, developers and managers. To subscribe, go to Regenesis.net. He can be contacted by email at .