Besides writing about resales in the Charlotte Condominium market, I will share from time to time the priceless jewels that come across my path...and this one is a classic! From the Tar Heel Realtor Newsletter, February 2005...A Question to the Forms Guy from an agent in NC.
Dear Forms Guy,
I have a listing on a condo. It's under contract and was supposed to close yesterday, but there's a problem. When I took the listing, the seller told me he had read in his association newsletter that bids on repainting the exterior of all the units in the complex had come in considerably higher than anticipated, and that there might be a special assessment to cover the increased costs. I called the treasurer of the association and he told me that the association's board had discussed the possibility of an assessment at its last meeting but hadn't voted on it yet. Even though the assessment hadn't been approved, to be on the safe side the seller checked "Yes" to question No, 19 on the Residential Property Disclosure Statement and wrote in "ASSESSMENT TO PAINT ALL UNITS BEING CON- SIDERED BY OWNERS' ASSOCIATION" in the blank at the end of the Disclosure Statement. We got a good offer on the condo, and I wrote the exact same wording in the first blank in the "Special Assessments" section (paragraph 6) of the Offer to Purchase and Contract. I wrote "N/ A " in the second blank in paragraph 6 since the assessment had already been disclosed on the Disclosure Statement and in the first blank in paragraph 6 of the Offer.
The board voted to approve the assessment a week before the closing date. It will be paid in 12 monthly installments beginning in two months. When the closing attorney's paralegal faxed me a copy of the HUD-I settlement statement the day before closing, it showed the assessment as the seller's obligation. I called the attorney and told her in the nicest way I knew how that her paralegal had screwed up the HUD-I. She told me the contract clearly stated that the seller was obligated to pay the assessment. What I want to know is, how can that be? Number one, the seller disclosed the assessment on both the Disclosure Statement and the Offer. Number two, it's not even payable until after the closing date anyway.
Would you do me a little favor and call the closing attorney and set her straight? Signed, Mighty Miffed
Dear Mighty Miffed, I'm mighty sorry, but I think the closing attorney is right. There are two blanks in the Special Assessments paragraph of the Offer to Purchase
and Contract form (standard form 2-T), and they serve very different purposes. In the first sentence of paragraph 6, the seller warrants that there aren't any pending or confirmed special assessments. If there are any pending or confirmed special assessments, the blank at the end of that first sentence is where the seller must describe them.
The second sentence of paragraph 6 is an agreement between the buyer and seller about who will be responsible for any pending or confirmed special assessments that may exist. The way the pre-printed wording reads, the seller is responsible for any special assessments that may be "con- finned" through the time of closing, and the buyer is responsible for any special assessments that may be "pend- ing." According to the Guidelines for Completing the Offer to Purchase and Contract (standard form 2G), "[a] ' Confirmed ' assessment is defined as an assessment that has been imposed by a governing body. A 'Pending' assessment is defined as an assessment that is under consideration by a governing body." If the parties agree to
vary the pre-printed wording about who is responsible for the payment of any assessments, that agreement needs to be set forth in the blank at the end of the second sentence. In your situation, the seller properly disclosed the existence of the "pending" assessment in the first blank in paragraph 6. However, just because the seller disclosed it doesn't make the buyer responsible for paying for it. Since the condo association board approved the assessment prior to closing, the second sentence of paragraph 6 states that the seller is responsible for it unless otherwise agreed in the blank at the end of the sentence. Since "N/ A " was inserted in the second blank, the parties did not agree other- wise, and therefore, the assessment is your client's obligation. Also, it is immaterial that the owners won't actually begin paying for the assessment until after the closing date. The assessment was "confirmed " when it was
imposed by the board, not when it becomes payable by the owners.
Sincerely, Forms Guy.
NCAR, 4511 Weybridge
Lane, Greensboro, NC 27407.
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