If a home is located in a managed community, whether that is a condominium, single-family home homeowners association, townhome community or any other managed community, the buyer of that home is entitled to information about the home’s financial standing in the association and financial information about the association itself. The resale certificate provides transparency to the buyer and guarantees that the seller meets all association obligations before the property is sold. It can impact your association in other ways as well, especially if your association is self-managed.

What does the law in West Virginia say about resale packages?

In West Virginia, condominium laws are defined in Uniform Common Interest Ownership Act. Everything about community associations, from how they are created to the records they need to keep, is contained in this law. That includes resale certificates and packages and the information that they need to contain. In West Virginia, there are circumstances when a resale certificate does NOT need to be provided to a home buyer. Among other reasons, if the home is a gift or inheritance, if it’s in foreclosure, if the home is transferred via court order or the government or if the annual association assessment fees total less than $500, then there is no obligation to provide the buyer with a resale certificate.
If a resale certificate is required, the unit owner must provide the buyer with a resale package that includes the declaration of the condominium’s creations, bylaws, rules and regulations of the association and the resale certificate before the contract is signed. Once the information has been provided, the buyer has five days to cancel the sale. The resale certificate must include the monthly association assessment fees and any amounts that the current owner owes to the association, a statement of any other fees that unit owners have to pay the association, planned expenses for the current and next two years, the amount in the association’s reserves, the most recent balance sheet, income and expense statement, current operating budget, any judgements against the association and any lawsuits the association is involved in plus any insurance coverage provided for the benefit of unit owners. The board must also include a statement about whether or not they have any knowledge of health or building violations related to the home or the common areas of the community.
The association has to provide this information to the seller within 10 days of the request. The unit owner is not responsible for any mistakes that the association makes when completing the form. Even if the amount of assessment fees on the certificate is wrong, the new owner is not required to pay the association any more than the amount on the certificate, so it’s critical to the financial health of the association that the certificate is accurate. The buyer can also cancel the sale if the certificate is not provided.  

To learn more about resale packages and certificates, and their impact on buyers, sellers and community association boards, check out our interview with resale expert Marlayna Bohrman.

How do self-managed communities handle resale packages?

They actually have whoever is in the office create these packages, whether that’s a board member or a clerical staffer or the community manager they’ve hired. The drawback to that is that the liability for mistakes or inaccuracies in the information is on the person providing the documents. If a professional property management company, which usually creates these certificates simply because they handle the accounts receivable and financials, makes a mistake, it is on the management to pay the community association the amount that was not collected at closing because of the mistake. The homeowner has to be notified of the error and informed about the correct amounts to pay, for example. Having a professional property management company handle resale packages and other mortgage-related paperwork takes all of that liability off the association and makes sure the association is paid all that it is owed.
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Wednesday April 26, 2017