Tip 16-2016: NO HOA – Double Check!
The VAR Contract, in Paragraph 23, “The Property Owners Association Disclosure”, indicates whether or not the property being purchased is within a Home Owners Association (HOA). However, just because the “Is Not Located” box is checked does not necessarily mean the property is free from a set of governing covenants, conditions or restrictions (CCRs).
To qualify as an HOA, there has to be the ability to collect dues and/or there is common area to maintain. Usually a Home Owners Association Board is in place and most definitely a recorded set of restrictive covenants (CCRs). These CCRs are provided to the Purchaser with the required “Association Disclosure packet”.
However, if there is no required HOA packet, there still may be a set of CCRs that govern the property being sold. Remember, just because there are no dues, does not mean there are no rules or restrictions on the property. There could also be other restrictions (such as road maintenance agreements, subdivision restrictions, etc.) that affect the Purchaser’s title to the property. (Typically these types of restrictions without HOAs can be found in old established neighborhoods and subdivisions.)
Therefore it’s always a good idea for the listing agent to ask the Seller for previous title work to see if there are restrictive covenants (maybe even a road maintenance agreement) that needs to be reviewed. The VAR Contract in Paragraph 15, entitled “Title”, provides that the property be “subject to such restrictive covenants…which do not materially and adversely affect the use of the Property for residential purposes or render the title unmarketable”. This way the Purchaser will not get any surprises at (or even after) closing, if the Purchaser intends to do something with the property that may not be allowed according to the CCRs.
Looking forward to a Great Memorial Day!
William (Bill) D. Tucker, III
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