There are many moving parts involved in the sale of a condominium, townhome or cooperative share. Is the unit staged to get the best possible price? Is the home priced right? What do sellers need to tell buyers about the homeowner’s association? Some sellers are confused about what they need to tell buyers about their association. Minnesota Statutes Chapter 515B, commonly known as the Minnesota Common Interest Ownership Act (MCIOA), offers guidance. The resale disclosure certificate required under MCIOA sets forth basic information about the association that sellers must provide to buyers, including information about the association’s finances and operations. The certificate can be a very useful tool to help buyers make an informed decision about whether to purchase a particular condominium, townhome or cooperative share.
Which associations must complete a resale disclosure certificate?
Many older townhome and cooperative associations are under the impression that, because they are not governed by MCIOA, they are not subject to the disclosure requirements of MCIOA. They are incorrect. Section 515B.1-102(b)(3) of MCIOA provides that Section 515B.4-107, applies to all planned communities and cooperatives, regardless of when they are created. (Nearly all of the provisions of MCIOA apply to all condominium communities, including the resale disclosure requirements.) Therefore, all townhome, condominium and cooperative communities are subject to the resale disclosure requirements of MCIOA, even if the community is not otherwise subject to MCIOA.
Who is responsible for providing the resale disclosure certificate?
Under MCIOA, the seller must provide the resale disclosure certificate and related documents to the buyer. The association must furnish the completed resale disclosure certificate within 10 days after receipt of a request from the seller or his agent.
What information should be disclosed in the resale disclosure certificate?
The form of the resale disclosure certificate is set forth in Section 515B.4-107 of MCIOA.
- Paragraph 2 provides information about assessments, including any unpaid assessments, fines or charges. Under MC-IOA, a buyer is not liable for any unpaid common expense assessments, including special assessments, if any, not disclosed in the resale disclosure statement.
- Paragraph 5 recites what components of the community the association is obligated to replace and how the replacement cost is funded (i.e., whether the cost is “charged back” to the unit owner or funded through annual or special assessment).
- Paragraph 13 asks whether there are any “matters affecting the occupancy or use of a unit, or the unit owner’s obligations with respect to the unit” that are deemed material. Disclosures made here might reference, for example, leasing restrictions, identification of the community as a 55-plus community, whether the building or community is a “no pets” community, etc.
Is the buyer entitled to cancel the purchase agreement after receiving the resale disclosure certificate?
Yes. Unless a buyer is given the resale disclosure certificate more than 10 days prior to signing the purchase agreement for the unit, the buyer may cancel the purchase agreement within 10 days after receiving the certificate. This 10-day period may be modified or waived, in writing, by agreement of the buyer only after the buyer has received and had an opportunity to review the certificate. The seller may not (1) condition the sale of a unit on the buyer’s willingness to modify or waive the buyer’s 10-day right of rescission; (2) contractually obligate the buyer to modify or waive the 10-day right of rescission; or (3) include a modification or waiver of the 10-day rescission period in the purchase agreement. To be effective, a modification or waiver of the 10-day rescission period must be in writing and must be signed at least three days after the buyer receives the certificate.
How does a buyer cancel the purchase agreement based on the resale disclosure certificate?
A buyer who wishes to cancel a purchase agreement during the 10-day review period may do so by hand-delivering or mailing notice of cancellation to the seller or the seller’s agent within the 10-day period. If a buyer cancels the purchase agreement based on the certificate, buyer is entitled to a prompt refund of all earnest money and any other payments made by buyer.
The resale disclosure certificate is an important part of the disclosures made by a seller related to the sale of a condominium, townhome or cooperative share. The operations of the association should be an integral part of a buyer’s purchase decision. Buyer should carefully review the resale disclosure certificate to ensure purchasing the subject property is the right decision for the buyer.
This article was originally published in Real Estate Agent Magazine.