Florida Legislature Considers Ban on Estoppel Fees

January 8, 2024
Should all homeowners pay for estoppel certificates when one owner is looking to sell?

The Florida Senate is considering a new law to eliminate estoppel fees charged by homeowners and condominium associations (See, 2024 Senate Bill 278, https://legiscan.com/FL/text/S0278/id/2852034). An estoppel certificate is typically ordered by a title company as part of a closing for a property and sets forth pertinent information about the community association, such as the past due amounts, whether there are pending special assessments, whether board approval is required, etc. In 2017, in a move applauded by many realtors and closing professionals, the Legislature revised the statutes to cap the fee at $250.00 for an estoppel certificate on properties that are not delinquent. This latest proposed statutory change would eliminate the fee altogether.

It is easy to understand why realtors and closing agents would be proponents of this latest change. As it stands now, the title agent typically pays the estoppel fee to the association or its management company up front and looks to have it reimbursed from the buyer at closing. From the outside looking in, certainly, this would remove a (relatively minor) obstacle to closing. Indeed, it’s easy for these people to argue that a $250 fee is not commensurate to the amount of time and effort needed to produce an estoppel certificate. However, there’s much more to the estoppel certificates than just printing out an account ledger.

Prior statutory changes increased the amount of information required to be disclosed on an estoppel, set strict time limits to provide them (10 days), and required refunds in the event that closings fell through. With the requirements to include additional information and penalties for not meeting timelines, producing estoppel certificates not only takes more time to ensure accuracy, but also carries significant liability. For example, the failure to disclose upcoming special assessments or the existence of violations on the property can lead to multiple thousand dollar losses for a community association. This new statute presumes to require community associations to perform this work for free, but that is not how it will play out.

This will operate to increase the common expenses for the associations, leading to an increase in assessments for everyone.

The reality is that community associations themselves do not typically produce the estoppel certificates. Rather it is produced generally by the management company or the attorney for the association. As vendors of the association, one cannot assume that these vendors will simply do the work for free going forward if this legislation passes. Rather, they will still perform the same work, carrying the same liability, with the difference of those amounts being charged to the association as a client. From a business perspective, many management companies offer lower monthly rates because they anticipate income from the production of estoppel certificates. If they cannot charge this to the closing agents, buyers or sellers, it will likely lead to increased management fees. This will operate to increase the common expenses for the associations, leading to an increase in assessments for everyone.

The legislators and lobbying interests promoting this change should consider these unintended consequences. One cannot expect professionals to perform work, especially that which carries liability, for zero fee. Therefore, the end result of this legislation would simply be to increase assessments for all homeowners. In a time when assessments are increasing throughout Florida due to an ongoing insurance crisis and uncertain labor and supply market, passing legislation to further pass the costs from a single buyer or seller to the association membership as a whole would be further detrimental to Floridians.

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