As a real estate closing attorney here in beautiful Lakewood Ranch, board certified in real estate, in fact, I can honestly say that I love handling real estate closings. Having navigated the thrillingly adversarial waters of other practice areas earlier in my career, such as representing both the harried debtors and the hopeful creditors in bankruptcy court, and also dealing with tangled litigated matters such as contract disputes and debtor-creditor relations, I find the typical real estate closing a breath of fresh air. It’s one of the rare areas of law where all parties – buyers, sellers, agents, lenders – are generally rowing in the same direction, aiming for that sweet, mutually beneficial outcome. Unlike the zero-sum games I’ve encountered in practice-past, a smooth closing is a win-win-win for everyone.
The HOA Management Company Cometh
That is, of course, until the HOA and their often-imperious management companies insert themselves into the equation. If there’s one entity that consistently elicits groans and eye-rolls when war stories are shared around the closing table… the one party that buyers, sellers, agents, and even lenders seem to collectively loathe… it’s the HOA and their management companies (the bad ones, anyway). And why? Because far too often, they employ improper, dubious tactics during the closing process, using the closing process as leverage and an excuse to engage in what I call – dare I say — “Estoppel Extortion.”
Of course, they’re not all bad. But, as they say, one bad apple can spoil the bunch. And in my dealings, I’ve run across more than just one bad one.
Unlawful Fees and Unreasonable Delays
Over my years practicing real estate law, I’ve witnessed a rogues’ gallery of HOA overreach during closings. We’re all familiar with the inflated estoppel fees that seem plucked from thin air, often exceeding statutory limits with the flimsy justification of a “third-party fee” or some other vaguely defined service. And don’t even get me started on the glacial pace at which some of these management companies deign to produce these crucial documents, blowing past the legally mandated timelines as if they’re doing us all a favor.
“Surprise! You’re in Violation!”
But the chicanery doesn’t end there. What truly raises my legal hackles is the introduction of last-minute demands and conditions that have no basis in law or often, even in reality. Take, for instance, the classic rabbit-out-of-a-hat estoppel trick: suddenly, a homeowner who has lived peacefully for years is informed, at the eleventh hour, that their perfectly acceptable (and long-standing) paint color or roof tile is in violation of some obscure covenant. It’s in violation? Really, it’s been there for years…
What results from this unexpected surprise? Here are a few likely outcomes:
- A seller must repaint or replace before closing… not likely with how difficult it is to get contractors to work on something timely…
- the buyer may cancel… not ideal)…
- the parties can agree that the “problem” will be fixed after closing, which usually requires some indemnification agreement be prepared and funds escrowed through closing… unnecessary cost and burden on the parties.
When an HOA waits until closing to notify the property owner about a violative condition, when that condition has existed for years, this isn’t about upholding community standards; it’s about leveraging the immense pressure and stress of a pending sale to force the seller into immediate and costly action for issues the HOA has inexplicably ignored for years. Dirty pool, indeed.
Another Case in Point: Management Company Overreach
To illustrate the kind of legally questionable actions I often encounter, here’s some verbatim language a management company recently included in its email to my office when delivering the estoppel certificate:
Battaglia Law, PLLC has requested an estoppel certificate(s) as the designee for [owner/seller] under Florida Statute. Please see the attached estoppel certificate(s) per your request. [HOA] has prepared and delivered the certificate(s) to your company as the parcel owner’s designee pursuant to Florida Statute §720.30851(6). The estoppel fee(s) noted and payable by your company, as the financially responsible party, to [HOA] should be sent to the address noted on the estoppel certificate(s). Failure to pay the fee may subject your company to additional costs and attorney’s fees. [HOA] is holding your title company financially responsible for these assessments/fees regardless of whether your company appropriately collected the assessments/fees at time of closing. If the closing date changes, or the contract for sale is canceled, notification is required.
Also, please have the buyer complete the attached New Resident form to be sent back with the closing documents. This is a requirement for future correspondence.
Please include the DEED with all payments.
This Estoppel is only valid for 30 days. ** DISCLAIMER: It is the responsibility of the Title Company to check back for updates and or to update us on changes in closing date that may affect the amount due if any is noted.**
Decoding Their Arrogant Defiance of Florida Law
Let’s break down why this communication is riddled with ridicule and exemplifies the arrogance of the “Estoppel Extortion” mentality common to many of these management companies.
- “The estoppel fee(s) noted and payable by your company, as the financially responsible party…”
- A reading of Florida Statute § 720.30851 clearly indicates that the parcel owner is responsible for the estoppel fee. Attempting to designate the title company as the “financially responsible party” is, in my opinion, a gross misrepresentation of the law. It also ignores the fact that, if a real estate transaction cancels, the payor is entitled to a refund for any estoppel fee paid. How ’bout them apples?
- “…Failure to pay the fee may subject your company to additional costs and attorney’s fees.”
- While the HOA can pursue the parcel owner for unpaid assessments and potentially related costs, threatening the title company with additional costs and attorney’s fees for non-payment of the estoppel fee is legally dubious.
- “[HOA] is holding your title company financially responsible for these assessments/fees regardless of whether your company appropriately collected the assessments/fees at time of closing.”
- This statement attempts to impose direct liability on the title company for the seller’s underlying assessments, which is not supported by the statute. The title company’s role is typically to facilitate the collection and disbursement of funds at closing, not to act as a guarantor for the seller’s debts to the HOA.
- “Also, please have the buyer complete the attached New Resident form to be sent back with the closing documents. This is a requirement for future correspondence.”
- While collecting new resident information is a legitimate HOA function, mandating its submission with the closing documents as a condition related to anything at all is a gross overstep. The estoppel is about the seller’s current standing, not the buyer’s future obligations. The associations and their management companies have obligations to perform whether or not a specific form is provided at a specific time.
- “Please include the DEED with all payments.”
- Requiring the deed with the estoppel fee payment is an unnecessary administrative hurdle not mandated by law. See above re: specific forms at specific times.
- “DISCLAIMER: It is the responsibility of the Title Company to check back for updates and or to update us on changes in closing date that may affect the amount due if any is noted.”
- While prudent communication is always helpful, the statute sets a 30-day validity period for the estoppel, meaning that, once issued, parties may rely on the information appearing on the face of the estoppel for 30 days. This disclaimer attempts to shift the burden of ensuring accuracy during that statutorily mandated timeframe onto the closing office. But, the plain language of the statute makes it absolutely clear – it is not the duty of the closing office or any other party to request an update; it is the responsibility of the association and their management companies to amend the estoppel should additional information become known to the association. The law is the law and no amount of arrogance can change it.
Standing Together Against “Estoppel Extortion”
Florida Statute § 720.30851 clearly outlines the process for estoppel certificates, including fee limitations and delivery timelines. The blatant disregard for these statutes by some HOAs and their management companies is a persistent problem that we, as legal and real estate professionals, must actively combat. Remember, Florida law provides a powerful tool: “A summary proceeding pursuant to s. 51.011 may be brought to compel compliance with this section, and the prevailing party is entitled to recover reasonable attorney fees.”
For my fellow closing attorneys agents, and invaluable other players in the process, we cannot stand idly by while this “Estoppel Extortion” continues. We have a responsibility to our clients to ensure a smooth and legally compliant closing process. Educate yourselves on the law. Push back against unlawful demands. Inform your clients of their rights. Realtors, your advocacy for your clients is paramount – understanding these estoppel pitfalls empowers you to guide them effectively and stand alongside us in demanding fair and legal practices.
The real estate closing should be a positive culmination of a significant transaction, rewarding everyone for the effort it takes to move the mountain. The process shouldn’t be upended or held hostage by the overreach and, frankly, the extortionary tactics of some HOAs and their management companies. It’s time we, as legal and real estate professionals in Florida, collectively insist on adherence to the law and put an end to this “Estoppel Extortion” once and for all.
