Who Pays the Estoppel Fee in Florida?

An estoppel certificate is important in Florida real estate transactions involving properties governed by homeowners associations (HOAs) and condominium associations. This document provides a clear financial snapshot of a property, helping buyers and sellers understand financial obligations. Obtaining this document often involves a charge, known as an estoppel fee, which covers the administrative effort of its preparation.

Estoppel Certificates and Their Purpose

An estoppel certificate is a legally binding official statement outlining a property owner’s financial standing with their community association. It includes all current and outstanding monetary obligations, such as regular assessments, special assessments, and any other fees or charges due to the association. This certificate also includes information about any uncorrected violations of the association’s rules or governing documents associated with the property.

For buyers, the estoppel certificate is a significant tool for due diligence, helping ensure they are not unknowingly inheriting hidden liabilities or undisclosed debts from the previous owner. Florida law holds purchasers jointly and severally liable for unpaid dues and assessments owed by the prior owner, making this document a necessity to protect their investment. Sellers benefit from obtaining this certificate as it provides a formal record that all their financial obligations to the association have been settled or will be at closing, facilitating a smooth transfer of ownership.

Florida’s Legal Framework for Estoppel Fees

Florida statutes specifically regulate the preparation and delivery of estoppel certificates and the fees associations may charge. These provisions are found in Florida Statute 718.116 for condominium associations and 720.30851 for homeowners associations. These statutes establish the framework for how and when certificates must be issued, along with the permissible fee structure.

Community associations, or their authorized agents, are permitted to charge a reasonable fee for preparing and delivering an estoppel certificate. The Department of Business and Professional Regulation (DBPR) is responsible for periodically adjusting these fees based on the Consumer Price Index, typically every five years. As of recent adjustments, the standard fee for an estoppel certificate, when no delinquent amounts are owed to the association, is capped at $299.

Additional fees may apply under specific circumstances. If an estoppel certificate is requested on an expedited basis, requiring delivery within three business days, an extra fee of up to $119 may be charged. If a delinquent amount is owed to the association for the property, an additional fee not exceeding $179 can be added to the standard charge. This means the total cost for an expedited certificate on a delinquent account could approach $597.

It is important to note that the authority to charge these fees must be established by a written resolution adopted by the association’s board or through a written management contract. If an association fails to deliver the estoppel certificate within 10 business days of receiving a written or electronic request, no fee may be charged for its preparation and delivery. This provision helps ensure timely compliance from associations. Additionally, if an estoppel certificate is requested in conjunction with a sale or mortgage, but the closing does not occur, the fee is generally refunded to the payor within 30 days of a written request, provided reasonable documentation is supplied that the sale did not happen. The obligation for this refund ultimately rests with the parcel owner, and the association may seek reimbursement from them.

For multiple units or parcels owned by the same individual, if simultaneously requested from the same association and no past due monetary obligations exist, the total aggregated fee is also capped. For instance, for 25 or fewer units, the total fee may not exceed $896, increasing for higher numbers of units up to a maximum of $2,985 for more than 100 units. These statutory limits are designed to provide predictability and prevent excessive charges for a necessary part of real estate transactions.

Navigating Estoppel Fees in Real Estate Transactions

The responsibility for paying the estoppel fee in a Florida real estate transaction is typically determined by the terms outlined in the purchase agreement. While Florida law dictates the maximum allowable fees and the association’s obligations, the specific party responsible for payment is usually negotiated between the buyer and seller. In many standard residential contracts, such as the FAR/BAR contracts, the seller is designated as the party responsible for paying the estoppel fee.

Payment arrangements can vary, and it is possible for the buyer to pay the fee, or for the cost to be split between the parties. Clear contractual language regarding the estoppel fee is important to prevent disputes during the closing process. The title company or closing agent typically orders the estoppel certificate on behalf of the parties involved in the transaction.

Timely ordering and delivery of the estoppel certificate are important for a smooth closing. Associations are required to provide the certificate within 10 business days of a request, but delays can occur, especially during busy real estate periods. If the certificate is not delivered promptly, the association cannot charge a fee, which underscores the importance of adherence to statutory timelines. The estoppel fee is typically collected at closing, often appearing as a seller’s expense on the settlement statement.

Failure to obtain an estoppel certificate or receiving an inaccurate one can lead to complications for the buyer. Without this document, a buyer could inadvertently become responsible for the seller’s unpaid association dues or assessments, as they are often jointly liable under Florida law. Therefore, meticulous attention to the details within the estoppel certificate and its timely acquisition is a crucial step in ensuring a transparent and secure property transfer.