As a real estate attorney handling closings right here in Florida, specifically in the Sarasota, Bradenton, and Lakewood Ranch area, I get this question a lot from sellers: “Should I pay my upcoming HOA assessment if I’m selling my house?”
The short and sweet answer is a resounding YES!
I understand why the question comes up. You’re focused on packing, finding your next home, and the flurry of activity that comes with selling. The thought of shelling out money for an HOA assessment when you’re about to leave might feel counterintuitive. However, skipping that payment can actually cause more headaches and potentially cost you more money in the long run.
Let’s break down why it’s crucial to stay current with your Homeowners Association (HOA) or Condominium Association (COA) assessments, even when you’re selling your Florida property:
Why Paying Your HOA Before Closing is the Smart Move.
- Avoid Late Fees and Penalties – Which You Will Ultimately Pay: This is the most immediate and crucial reason. HOAs have rules and regulations, and typically, they charge late fees and interest on overdue assessments. Why incur unnecessary expenses when you’re already in the process of a significant financial transaction? Remember, as your closing attorney, I will be collecting all outstanding HOA dues and any associated late fees from your proceeds at closing. So, if you skip a payment and the HOA charges a late fee, that’s simply more of your money that will be deducted at the closing table.
- A Smooth Closing Process and the Estoppel Certificate: Title companies and closing agents meticulously review the status of HOA accounts, and this is where the estoppel certificate comes into play. An estoppel certificate is a legally binding document from the HOA that confirms the current balance owed by the seller, including any outstanding assessments, late fees, or other charges. We, as your closing team, rely on this document to ensure a clear title for the buyer. An unpaid assessment can delay the issuance of a clean estoppel certificate, potentially leading to delays in your closing timeline. Buyers want a clean title, and any discrepancies or outstanding balances revealed in the estoppel certificate will need to be resolved before the sale can be finalized.
- Proration is Your Friend, But Late Fees Aren’t: This is the key piece of information that often reassures sellers. In Florida real estate closings, HOA assessments are prorated between the buyer and the seller. This means you will only be responsible for the portion of the assessment that covers the period before the closing date. The buyer will be responsible for the portion covering the period on and after the closing date.
- Think of it like this: If your quarterly HOA dues are $600 and your closing date falls halfway through the quarter, you’ll only be responsible for $300 (approximately), and the buyer will be responsible for the remaining $300. This adjustment is handled seamlessly by my office, as the closing agent, by including the appropriate adjustments on the settlement statement or closing disclosure. However, this proration applies to the base assessment. Late fees incurred due to non-payment are solely your responsibility, meaning they will be deducted from your closing proceeds, and NOT prorated between you and the buyer.
- Maintaining a Good Standing with the HOA: While you’re leaving, maintaining a good standing with the HOA until closing can prevent any potential complications or last-minute issues. It ensures a clean estoppel certificate can be obtained without unnecessary delays or disputes.
- It’s Not “Lost” Money (The Base Assessment, That Is): As I often explain to my clients, paying the assessment isn’t throwing money away. Due to the proration, you’ll essentially be reimbursed for the portion of the base assessment that covers the period after you no longer own the property. Some of the smart ones in the room may try to make a point about the time-value of money, but, remember, late fees will be assessed and are a completely avoidable expense.
How Does the Magic Happen?
If you’re wanting the granular explanation, this is how the proration magic actually happens:
- We obtain and review the estoppel certificate from the HOA.
- The estoppel certificate verify the current status of your HOA account, including any outstanding balances and potential late fees. It also speaks to buyer application status, and whether any violations of the property exist, but these are topics for another blog post.
- The estoppel certificate confirms the correct amount of the assessments and the frequency (monthly, quarterly, annually).
- The estoppel certificate confirms the “paid through” date, confirming the date through which your assessments are current.
- We use the assessment information to calculate the prorated amount of the base assessment based on the closing date.
- We include the appropriate credits and debits to both the seller’s and the buyer’s columns on the closing statement.
- If you owe any late fees, and/or if you are not current, these are deducted from your proceeds and are NOT prorated.
In Conclusion
If you’re selling your home in Florida, especially here in our vibrant Sarasota community, and an HOA assessment is coming due, pay it. It’s the simplest way to avoid late fees (which will directly reduce your net proceeds), ensure a smooth closing process (and a clean estoppel certificate), and while the base assessment will be prorated, neglecting payment will only lead to unnecessary deductions from your sale proceeds.
Don’t let an unpaid HOA assessment become a last-minute hurdle in your real estate transaction. Stay proactive, pay your dues on time, and let the closing process handle the fair distribution of the base assessment costs.
Disclaimer: This information is for general guidance only and does not constitute legal advice. You should always consult with a qualified real estate attorney in Florida for advice specific to your situation.
