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CC&Rs: The Ties That Bind
By Barbara Pronin
Most real estate agents—and many of today’s buyers—know that purchasing a condominium, or any other common-interest development governed by a home owner association (HOA) can be a bit more complicated, and perhaps more restrictive, than purchasing a free-standing, single family home.
That’s because each HOA community has its own set of rules - commonly known as Covenants, Conditions and Restrictions (CC&Rs) - that have been established to protect, preserve, and enhance property values within the community.
Homeowners who live in an HOA community agree to pay monthly HOA dues and assessments, and to abide by the stringent rules within its CC&Rs. These may include limitations on any number of issues from how the clubroom may be used to what color you may paint your home, or where you can park your car - and residents who violate the CC&Rs may be subject to fines, penalties, and even lawsuits.
For those reasons, a copy of the CC&Rs, as well as a host of other paperwork including HOA financial statements, reserve funding initiatives, assessment enforcement policies and more needs to be received - and agreed to - by the buyer prior to closing.
The documents do not come free of charge, and the fees for them vary from community to community and from state to state, as does the questions of who is responsible for paying for them.
In California, for example, the state mandates that the fees must be paid by the seller - and the fees have soared to several hundreds of dollars as HOAs and their management companies realized that providing all that paperwork for every transfer of ownership could be a significant source of profit.
While the costs may be reduced by having the seller provide the buyer with current copies of the documentation in their possession, it is imperative for the escrow company to have accurate information, notice of the buyer’s approval of the documents, and timely payment of the fees in order to meet contractual deadlines.
This can cause its own set of problems if/when a seller responsible for payment does not have the necessary funds to deposit into escrow in a timely manner.
For reasons like these, real estate agents need to know their state’s regulations regarding the transfer of ownership in HOA communities. Sellers should be made aware early of their fiscal and transactional responsibilities, and buyers need to understand the implications and responsibilities that come with buying in an HOA community.
Your title/escrow partner can play an essential role in ensuring that all the i’s are dotted and all the t’s are crossed in time for a scheduled closing.
Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.

This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax or investment professional for specific advice.  The material is meant for general illustration and/or informational purposes only.  Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. 

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