Handling an Estoppel Letter From a Homeowners Association

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An estoppel letter is generally a document used in the transference of a real property prior to the closing proceedings. It’s typically sent to the bank or lender of financing, to any applicable condo or homeowner association, and to the city or municipality clerk. It can also be sent to any resident who is requesting a mortgage payoff, or for an assessment of all due taxes or amounts that are left due on a tenant’s lease. This document is generally used to apply the stated amounts to any statement of settlement for both the buyer and the seller of any real estate. 

Receiving a Homeowner Association Estoppel Letter

An estoppel letter issued by your Homeowners Association is used as documented certification of a property owner’s monetary obligation to that specific association, noting monthly maintenance or association fees. Its used if a lending organization or bank has an applicant for a property under consideration for financing and it is necessary to find out whether the current property owner is indebted to the HOA and for how much. The lending organization can also use the information to determine if the seller has previously tried to alter the property in an unauthorized manner, because the letter itself displays any fees or charges against the property owner.  

What the Estoppel Letter Does for the Buyer 

An estoppel letter informs the buyer previous to the closing on the sale of the property whether or not the fees and charges against the property are current and outside a state of default.

  • If the letter shows that the current homeowner does owe delinquent fees or charges, the buyer can be assured by the lender that no charges or fees will be assessed to the deed at transfer.
  • This can also provide the buyer with the peace of mind that the property won’t later cost more than it originally stated, because the buyer will be made aware of all HOA fees and charges in the documentation of the estoppel letter. 

What the Estoppel Letter Does for the Lender 

Most lenders require an estoppel letter for any purchase of a property located under the purview of either an HOA or a Condo Association. This is so that the lender can assure that the property they are lending money to purchase is up to their regulated requirements in order to approve the loan. The lender will also want to verify that it isn’t going to absorb any hidden cost from the HOA by approving the loan to close only to find out the property comes with an extra charge from the Homeowners Association.

Getting Help

If you are either buying or selling property and your HOA writes an estoppel letter, you may want to have an experienced and qualified attorney review the letter. Your attorney can review any fees or clauses and can help you to better understand your obligations described in the letter.

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