Selling a Common Interest Development?

Agent Advisory

Are you selling a property which is part of a Common Interest Development (CID)?  Condos, townhouses, duo-ettes, and even single family residences may have CID restrictions in place.  Agents must know what they are selling, advise the purchaser, and get all the documents to the prospective purchaser for approval. 

Why Is This So Important?

Governing documents may affect the use, control and operation of the individually owned units, as well as the common areas. What color can your window coverings be?  Where can you park your RV?  How long can your children visit you?  Can you rent out your unit if you need to?  How big a party can you have in the clubhouse?  Can you have two cats and a dog?  These are but a few of the questions agents may find discussed in the governing documents.

Assist your purchasers by becoming familiar with the disclosure documents. Read the Covenants, Conditions and Restrictions (CC&Rs), Bylaws, and Articles of Incorporation if applicable.  These documents may be recorded.  Typically not recorded, yet just as important, are the Homeowners Association (HOA) Budget, and any Rules and Regulations. If the complex has a Subdivision Public Report, read it.  Be ready to answer questions on the major sections of the report, such as the developer's contribution to the budget and under what conditions it may cease. 

An agent's responsibility includes being prepared to answer the purchaser's questions, particularly when questions of proposed assessments (and what amount) or age restrictions are discussed in the documents. Clearly these items can influence whether or not a purchaser chooses to complete the transaction.  A wise agent familiarizes himself or herself about restrictions on the use of the CID amenities, such as the pool and clubhouse, etc.   Are there any pet restrictions, smoking rules, or parking space allotments?  If so, discuss with the purchaser when you go over the documents.  Don't let an unhappy purchaser discover a critical issue AFTER the close of escrow.

Who Does What:

The Seller should complete a Request and Response for Documents to acquire the documents noted above from the HOA.  This is in compliance with various CA Civil Code sections 1365-1368.  The requested documents may also include an insurance summary and the last 12 months' minutes of the Board of Directors meetings when available.  Such documents are typically supplied by the HOA to the Seller, and then passed on to the purchaser.  Agents may also ask the Seller for an additional Disclosure Supplement which simplifies and categorizes questions in a checklist form for the Seller to answer.

The selling agent delivers the documents to the purchaser and discusses whatever is appropriate to the purchaser.  The purchaser should carefully read and review these documents as well.  If there is anything which does not meet with the purchaser's approval, the transaction may not go forward.

In Closing

The Bureau of Real Estate (formerly the DRE) considers these CID real estate documents a part of a licensee's responsibility to read and understand.  If the agent does not understand the documents, engage the services of an attorney or accountant to interpret them.

Good Luck!