A homeowners association writes, amends and enforces regulations having to do with the use, maintenance and insurance for the common areas of a condominium, townhome or home subdivision. It operates under bylaws and a recorded set of subdivision rules commonly in the form of CC&Rs, or codes, covenants and restrictions. Every time a subdivision unit changes hands, the HOA prepares copies of all pertinent documents for transfer to the new owner. For this, the HOA or its management firm charges a fee.
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The purchase contract for the property identifies who pays the HOA document and transfer fees, which are sometimes separate and sometimes combined into one fee. In some places local custom calls for either the buyer or seller to pay, but the custom need not be the dictating factor. The buyers are free to submit a purchase offer to the sellers proposing whatever arrangement they want. The sellers can sign the purchase contract with the proposal intact, can write a counter offer that shifts the responsibility for payment or they can refuse the offer altogether, although it would not likely be solely over the HOA fees.
While responsibility for paying the HOA fees is spelled out in the purchase contract, the fee itself is not commonly listed because it is not under the control of either buyer or seller. The HOA or its management firm do the work and also set the fee. In at least one state–California–there is no limit to how high this fee can go. Commonly mentioned fees range from $100 to $400; one source lists an average cost at $225 to $250, as of 2007.
How to Reduce the Costs
Especially if the seller is very familiar with the recordkeeping protocols of the HOA and has confidence in their understanding of the documents, the seller may want to gather a set of all pertinent HOA documents himself. The advantage of doing this is that there will be no document transfer fee from the HOA, although it may still charge the party coming into its office for providing copies of any documents they don't already have. The disadvantage is that if any documents are inadvertently omitted, the party providing them may bear some liability.
How to Limit Costs
As either a buyer or seller, if you are concerned about closing costs and want to keep them within a specified range, you might consider writing a cap into the purchase agreement. As a buyer in a community in which the buyer typically pays HOA transfer fees, offer to pay the fees up to a specified limit and write into the contract that the seller will pay anything over that amount.