Oct 11, 2023
When diving into the world of real estate, there are various documents and terms that can seem perplexing. Among these is the “estoppel letter”. But what exactly is it, and why is it crucial when buying a home? Let’s shed some light on this term.
An estoppel letter, often referred to as a “seller’s affidavit”, is a legally-binding document obtained from a Homeowners Association (HOA) or another third-party. This letter confirms specific details about the property in question, mainly related to dues, fees, or any potential violations.
1. Transparency:
The estoppel letter provides clarity on any pending dues or obligations the current homeowner might owe to the HOA. This ensures that the new homeowner doesn’t inherit any unexpected liabilities after purchase.
Given its legally-binding nature, an estoppel letter serves as a shield against potential future claims. If any discrepancies arise after the sale, the buyer can refer to this document as a source of truth.
3. Smooth Transactions:
For properties that fall under an HOA, it’s common for transactions to stall due to unforeseen claims or dues. With an estoppel letter in hand, buyers and sellers can experience a smoother transaction process.
Florida stands distinct when it comes to the guidelines and requirements around estoppel letters. Given the importance of community associations in the state, understanding these requirements is crucial for anyone buying or selling property here. As a seller, the fee to obtain an estoppel letter will be a typical line item in your closing costs.
The need for an estoppel letter arises mainly when property owners within a community association decide to sell their home or condominium unit. Both the Florida Condominium Act and laws pertaining to Homeowners Associations emphasize the significance of estoppel letters/certificates.
If you’re looking to buy a home under an HOA, ensure you request an estoppel letter during the buying process. The seller or their agent will usually procure this from the HOA. It might come with a fee, but the investment is worthwhile, considering the peace of mind and protection it offers.
In Florida, an estoppel letter provides a comprehensive view of the fees or assessments that might be owed by a seller to their community association. This becomes particularly relevant because purchasers in Florida share liability with the previous owner for any dues or assessments due to the association. By understanding the amounts owed, they can be accurately collected from the seller at the time of closing. Thankfully, in most cases, sellers are up-to-date with their community association dues and assessments.
2017 marked a pivotal year for estoppel letters in Florida. Senate Bill 398 made amendments to the Florida Statutes, introducing a cap on the fees that can be charged by community associations or their management companies for preparing and delivering an estoppel certificate:
These regulations were introduced to ensure fairness and to prevent overcharging.
To maintain clarity and uniformity, Florida mandates that estoppel certificates follow a standardized format. This ensures that all relevant parties receive the crucial information needed for real estate transactions.
The effectiveness of these certificates varies depending on the delivery method:
Any breaches of these fee restrictions or form requirements can be reported to the Division of Florida Condominiums, Timeshares, and Mobile Homes. Notably, forms are available in both English and Spanish for accessibility.
An estoppel certificate in Florida must contain:
By having all of these elements in place, the estoppel certificate serves its purpose efficiently and transparently.