Bail-Out Deadlines by E-Mail

By Elizabeth Razzi
Sunday, July 15, 2007

Buying a condominium? A house in a neighborhood run by a homeowners association? You had better stay on top of your e-mail.

A very large and extremely important document could be coming your way. Its arrival starts the clock ticking on a short period during which you can cancel the deal, should you desire to back out of your purchase contract.

New laws that took effect in Virginia on July 1 change the process for distributing the extensive disclosure packages that must be given to anyone buying a home that is part of a condo or homeowners association. While the law directly affects Virginians, buyers in the District and Maryland, where the disclosure requirements are not as detailed as they are in the Old Dominion, may find the effects spilling over as management companies that do business in all three jurisdictions adopt new practices.

The heart of the change in Virginia: Association disclosure packages can now be delivered electronically unless the buyer requests a paper copy. Electronic delivery becomes the default option; before this month, buyers had to consent to receiving the documents by e-mail.

These disclosures typically amount to hundreds of pages -- a real in-box clogger.

And don't allow the message to linger unopened until you get around to buying a few extra reams of paper for your printer. Buyers in Virginia are allowed three calendar days to review the documents. In Maryland, the condominium law gives buyers seven days. In the District, buyers have three business days. (Times may vary for units bought directly from developers.) During those review periods, buyers can, upon written notice to the seller, back out of the deal for any reason and get their deposit refunded.

If you don't like the looks of the association's finances, you can quit the deal. If you think its rules about what kind of plants you can grow on your balcony or in your yard are too nit-picky, you can quit the deal. If you have simply changed your mind about buying, you can quit the deal. You don't have to offer an explanation.

Jon McNamara, a Long & Foster agent who handles properties in the District and Virginia, said some buyers will use the document review period as a way to get out of a deal if they have changed their minds about the purchase. "It's the easiest out because you don't really need justification," he said.

If you're a seller, of course, that review period is a big threat to your deal. It's in your interest to get those documents in the hands of a buyer and get past that review period as soon as possible after you and the seller have agreed on a contract. Electronic delivery helps speed up that process.

The cancellation period is there for a good reason. The association documents provide information that is absolutely critical to the decision to buy. The disclosures affect financial life as well as day-to-day living conditions. They include the association's financial statements and details about how much money it has to set aside in a reserve fund to cover big-ticket maintenance expenses. If the association doesn't have enough set aside in reserves, for example, a new owner could get hit with a special assessment, perhaps costing thousands of dollars, when the association has to pay a big bill for predictable expenses such as repaving the parking lot or repairing the swimming pool. You will learn if there are any big financial or legal liabilities looming. If you're moving into a large condo complex where large sums of money are at stake, it may be wise to have your accountant or financial adviser take a look at the documents to make sure you aren't buying into a big liability.

A key to your happiness in a condo or homeowners association is the Codes, Covenants and Restrictions section of the document. This is where you will find the all-important rules that can make your community feel like a haven from the unkempt outside world -- or like your own little gulag. You have just days to decide which it will be -- haven or gulag -- and to bail out if it feels like the latter. You may find rules about what type of window coverings and exterior paint you can use, whether you can park a boat or a truck on the property, whether you can put a wreath on the door, what types of pets you can keep and even whether you can put a basketball hoop in your own driveway.

Buyers may want to ask that these tomes be delivered to them in paper form. Brenda Harrington, a senior vice president with Legum & Norman, an Alexandria-based company that handles association management for more than 300 condos and homeowners associations in the area, said buyers will definitely be able to receive the paper format if they prefer. "Everybody doesn't have access to a computer," she said.

Virginia sellers can expect to pay more for their disclosure packages, regardless of whether paper or e-mail is used for delivery. Lisa May, government affairs manager for the Northern Virginia Association of Realtors, noted that the new legislation allows professional management companies to charge up to $325 for the package. That cap will rise over the years with inflation. Before July, the fee was capped at $100. In Maryland and the District, which do not have such caps, the fees run about $175 to $220, according to May.

Lana Reynolds, president of Community Management, a Chantilly company that manages more than 225 condos and homeowners associations in Maryland, Virginia and the District, said the firm always offers the opportunity to pick the documents up at its office or to receive them by regular mail. In Virginia, the company charges $265 for a package, which includes an inspection of the house or condo apartment to document whether it is in compliance with the association's rules. In Maryland and the District, it charges $265, or $180 without an inspection.

"You avoid having a situation where you have someone moving into an association and saying, 'Welcome to Heavenly Acres, Mrs. Smith, and by the way, here's a violation,' " she said.

It's the seller's responsibility to request and pay for the package, but buyers and their real estate agents should see to it that it is actually received.

E-mail Elizabeth Razzi at razzie@washpost.com.

View all comments that have been posted about this article.

© 2007 The Washington Post Company