Condo Sellers Must Tell Buyers About Special Assessment Costs

The firm’s latest Miami Herald “Real Estate Counselor” column was authored by Michael L. Hyman. The article, which is titled “Condo Sellers Must Tell Buyers About Special Assessment Costs — or Risk Lawsuit,” focuses on the need for condominium sellers to disclose looming special assessments to buyers. It reads:

. . . One of the most prevalent concerns for condo buyers has been the prospect of special assessments that can dramatically increase their total outlays after closing. Many sales contracts are incorporating the standard Florida Realtors/Florida Bar Condominium Rider, which now stipulates sellers must disclose any special assessments to buyers, including those that are levied, pending, or listed in board meeting agendas/minutes within the past 12 months.

However, as a recent lawsuit filed in Palm Beach County Circuit Court alleges, some sellers may not be abiding by such provisions in their contracts, and the result could be litigation to force them to pay special assessments imposed on buyers after closing. Buyers’ apprehensions over such scenarios are presumably among the factors that are negatively impacting sales.

In the case of Eugene and Debbie Friedlander v. Mark Kaplan, the Friedlanders purchased a condo unit from Kaplan in June 2024 at the Toscana condominium community in Highland Beach near Boca Raton. The sales contract stated that Kaplan was not aware of any special assessment that had been an item in an agenda or the minutes for board meetings during the preceding 12 months. It also indicated that if such an assessment was not disclosed, the seller would pay it in full.

The suit alleges that contrary to Kaplan’s representations, in March 2024 (three months prior to closing) the community’s general manager notified him and all other unit owners that the association planned a $7 million special assessment to replace the building’s elevators. It states the assessment was also included in the agenda for the Feb. 28 board meeting, and it was reported in the meeting minutes.

In Oct. 2024, approximately five months after the Friedlanders closed on the purchase, they were informed that the special assessment for the elevators had been levied, and they needed to pay more than $91,000 for their share. They demanded that Kaplan pay it but he refused, so they subsequently filed suit against him for breach of contract, and breach of implied covenant of good faith and fair dealing.

Special assessments are one-time charges levied by associations typically for major repairs, unexpected structural issues, code-compliance upgrades, or to make up for operating deficits. Traditionally, buyers have been responsible for paying assessments that are levied after closing, including those that were voted on and approved before their purchase.

However, during the last few years after the implementation of new statewide mandates for structural inspections/repairs, buyers have become more aware and concerned about pending special assessments. Given the slowdown in sales, sellers have been advised to cover any pending special assessments as an incentive, and buyers are demanding disclosures and using planned assessments to negotiate.

Agreements for sellers to pay the full amounts of planned assessments to circumvent buyer hesitation have now become prevalent. Other alternatives such as offering a seller credit to cover potential post-closing assessments or adjusting the purchase price to reflect the risks of such costs are also being employed. Rather than covering special assessments in full, sellers may offer a credit for the first three to six months of payments, which are typically separated into 12 monthly installments.

Buyers are taking the approach of digging deeper than simply asking sellers and/or listing agents whether assessments have been proposed, discussed or voted upon. Some are requesting and reviewing the minutes for all the board meetings during the preceding 12 months.

The key for buyers is not to rely on verbal assurances alone. If a seller has agreed to cover or adjust for assessments in any way, the buyer must ensure that such stipulations are carefully spelled out in their purchase agreement. They should also carefully review all the applicable association records and craft their agreement accordingly, and they should remain cognizant of the fact that eventually collecting from a seller with insufficient assets could become problematic.

For sellers, their obligations to disclose may be broader than those that are called for in today’s standard condo rider. A landmark Florida Supreme Court ruling from 1985 held that sellers have a duty to disclose facts that materially affect a property’s value but are unknown to buyers and not readily observable. It opened the door to successful legal claims against sellers for fraudulent nondisclosures if they had prior knowledge of such significant hidden defects. . .

Michael concludes his article by noting that while this remains a legal gray area, sellers who are made aware of future assessments and rush to sell their units without disclosing them are in perilous territory. He writes that in cases with allegations such as those in the recent lawsuit, it may prove difficult for sellers to avoid liability for special assessments that went undisclosed after their agreement stipulated that they must be disclosed and paid by the seller. Michael advises that rather than risking such potential liabilities, sellers should take into account the realities of today’s condo market and consider full transparency as well as concessions for looming assessments to incentivize sales.

Our firm salutes Michael for sharing his insights into this important issue for condominium sellers and buyers with the readers of the Miami Herald.  Click here to read the complete article in the newspaper’s website.

Our South Florida community association attorneys write about important matters for associations and unit owners/buyers in this blog and our Miami Herald column, which appears every two weeks on Sundays, and we encourage association directors, members and property managers to click here and subscribe to our newsletter to receive our future articles