Effective July 1, 2003, specific sales contract language and addendum are required if there is or will be 'recorded restrictive covenants'.

2003 Changes to Florida Law: Homeowner's Association Disclosure Law

Homeowners’ association / community disclosure

Florida lawmakers expand law to better educate consumers about homeowners’ association requirements, restrictive covenants, assessments

For years, we’ve been working with Florida law (F.S. 689.26) requiring sellers to notify buyers that they’re purchasing a home in a community where membership in a homeowners’ association is mandatory. The 2003 Legislature has expanded the law. The law does not affect contracts executed prior to July 1, 2003.

What’s different:

• Who receives the disclosure

• The buyer’s right to terminate the contract if he or she does not receive the disclosure

• The disclosure form itself and new language for the contract for sale and purchase

Who receives the disclosure:

Buyers of property where there is a mandatory or voluntary homeowners’ association, or where there are (or will be) recorded restrictive covenants governing the use and occupancy of properties in the community, or where there are assessments.

When should the disclosure be given to the buyer:

Before the contract is executed by the buyer. If the disclosure is not given until after a contract has been executed by the buyer, then the buyer has a right to cancel the contract within 3 days of receipt of the disclosure, or prior to closing—whichever occurs first.

Most Realtors require sellers to complete a real property disclosure form, though such disclosure is not required by law. Realtors should consider having sellers complete the Homeowners Association/ Community Disclosure at this time.

The disclosure form does not have to be made part of the sales contract. But the seller must provide the disclosure to the buyer.

• There are signature blanks for the buyer to fill in on the disclosure form. Although this is good evidence that the form was supplied to the buyer, the statute doesn’t appear to actually require buyer’s signature.

• If you use your own disclosure form, be advised that the statute requires the form to be substantially similar to the one that appears in the statute. Please review the law in its entirety. Arguably, minor changes which don’t alter the meaning as set out by the Legislature are permitted, although not advisable.

New language required for the Contract for Sale and Purchase:

IF THE DISCLOSURE SUMMARY REQUIRED BY SECTION 689.26, FLORIDA STATUTES, HAS NOT BEEN PROVIDED TO THE PROSPECTIVE PURCHASER BEFORE EXECUTING THIS CONTRACT FOR SALE, THIS CONTRACT IS VOIDABLE BY BUYER BY DELIVERING TO SELLER OR SELLER'S AGENT WRITTEN NOTICE OF THE BUYER'S INTENTION TO CANCEL WITHIN 3 DAYS AFTER RECEIPT OF THE DISCLOSURE SUMMARY OR PRIOR TO CLOSING,WHICHEVER OCCURS FIRST. ANY PURPORTED WAIVER OF THIS VOIDABILITY RIGHT HAS NO EFFECT. BUYER'S RIGHT TO VOID THIS CONTRACT SHALL TERMINATE AT CLOSING.

BEWARE: If the contract does not contain this statement, the contract can be voided at the buyer’s option anytime until closing.

Learn more about changes to F.S. 689.26:

The disclosure refers to “recorded restrictive covenants governing the use and occupancy of properties in the community.” What are these?

A restrictive covenant is an agreement that property be used only for certain purposes or in a certain manner. Such covenants can regulate the size, location, quality, cost and even the design of improvements, as well as the conduct of the owners of the property. Essentially, even where there is no homeowners’ association, if there are covenants regarding the use and occupancy of properties in the community where the property is located, the disclosure summary should be given and additional contract language provided.

How would a licensee know if there are covenants regarding the use of properties in the community?

The seller should be aware of such covenants. They would be referenced (and attached) to the title policy and on the deed to the property.

If the seller isn’t aware of restrictive covenants or the presence of a homeowners’ association—voluntary or mandatory—should the disclosure form be given and the new language added to the sales contract?

Better to play it safe. Have the seller complete the disclosure form and make the new language part of the Contract for Sale and Purchase. Many single-family home communities either have some type of homeowners’association, covenants regarding use and occupancy of properties in the communities or assessments.

What are meant by assessments?

Fees levied by the governing municipality, county or special district, or fees levied by a mandatory homeowners’ association.

What transactions are not governed by this law?

This law does not cover associations regulated by condos (Chapter 718), co-ops (Chapter 719), timeshares (Chapter 721) or mobile homes (Chapter 723). It does not apply to a subdivider registered under 498. All of these transactions already have disclosures.

What if the disclosure summary is not given before a buyer executes the contract?

If the disclosure summary is not provided to the buyer before he or she executes the contract, the contract is voidable by buyer by notifying the seller or seller’s licensee in writing of buyer’s cancellation. If the buyer does get the disclosure summary after contract execution, the buyer may cancel the contract within 3 days of receipt of the disclosure summary by notifying the seller or the seller’s licensee in writing as long as closing has not occurred. If the buyer doesn’t receive the disclosure summary and closes, the contract is no longer voidable.

Does a buyer have to be provided the covenants and restrictions or homeowners’ association documents?

No, the statute doesn’t require documents other than the disclosure summary be provided.

If the property lies within a community where there is more than one homeowners’ association, what should the licensee do?

If the information on the disclosure summary is identical for both associations, provide one form, naming two associations. If the information is not identical, have the seller provide two forms.

Who should complete the disclosure?

The seller should supply the information to the buyer according to the statute.

Is the licensee obligated to find out the answers to the questions on the disclosure form?

No, because the statute specifies that the seller is to supply the disclosure.

If the seller can’t answer one of the questions on the disclosure, can he or she indicate “unknown?”

FAR recommends against this practice, as it may be construed as failure to provide full disclosure. Finding the answers to some of the items on the disclosure could require some effort on the part of the seller. For instance, he or she should know if there is an obligation to belong to a homeowners’ association. The seller can find out about special assessments by contacting the city, country or municipality. Such assessments are often included on property tax bills. Information about covenants can be obtained from a representative of the homeowners’ association (officer, attorney or manager).

What if the information the seller provides on the disclosure summary changes? For example, what if the association has no rights to amend the covenants now, but once the developer turns over the rights to association, they will have that power?

Have the seller answer the questions correctly as of the time it is executed. The licensee can always add additional information on an addendum.

What happens if the disclosure form is not filled out correctly?

This could be the basis of a claim for misrepresentation, if the buyer relied upon the information, acted to his detriment and, as a result, was damaged. Additionally, a buyer might assert a right to void the contract, if done before closing,

How can the buyer get the disclosure before he executes the contract, if the seller has to provide the information on the disclosure form?

Licensees taking the listing may want the seller to complete the disclosure summary at the time a listing is taken. Some licensees may want to have it filled in at the same time the seller is completing a seller real property disclosure form. This way, the form could be supplied to the buyer before the buyer executes the contract. Alternatively, the listing licensee could provide the cooperating broker with a completed disclosure summary to be included as part of a buyer’s offer. This way, the buyer could receive and review the summary before contract execution and meet the requirements of the statute. Another option: An offer can be prepared, with a blank disclosure summary attached, subject to the seller completing the disclosure summary and submitting back to buyer for final contract execution. The contract with the completed disclosure summary would then be presented back to the buyer as a counteroffer. Buyer would then execute the counteroffer with the completed disclosure summary.

If the disclosure form is provided to a buyer prior to execution of the contract but is not made part of the contract, has the law been complied with?

Not completely. The additional contract language still needs to be included in the contract. If not, the buyer can void the contract prior to closing.

Do I need to add this disclosure form to contracts that were fully executed before July 1?

[ Home ]

For all inquiries, including questions and comments about this web site, please send mail to info@realty-direct.com (REALTY DIRECT CORP, LICENSED REAL ESTATE BROKER)
Copyright © 1997- 2004 REALTY DIRECT CORP