Who pays special assessments, the buyer or seller?
QUESTION: I have a listing under contract using the Offer to Purchase and Contract (Form 2-T). The buyer’s agent has informed me he has just discovered that the owners’ association imposed a $2,500.00 special assessment on each owner several months ago. It’s payable in installments of $500.00 over a period of five years. The seller is an absentee owner. He didn’t say anything about any special assessment when we completed the listing agreement and he checked “No representations” throughout the Disclosure Statement.
The buyer’s agent says that if the seller doesn’t pay the entire amount of the assessment he’ll be in breach of contract, even though none of the installments are payable until after the closing. Is the buyer’s agent right? Would it make any difference if the assessment hadn’t been approved yet?
ANSWER: Yes to both questions. According to paragraph 8(k) of Form 2-T, the seller is obligated to pay “in full at Settlement, all Special Assessments that are approved prior to Settlement, whether payable in a lump sum or future installments, provided that the amount thereof can be reasonably determined or estimated.” Since the assessment in question has been approved by the owners’ association and since the exact amount is known, the seller is responsible for paying it, even though it’s not due until after the closing. The seller’s refusal to do so would be a breach of contract that would entitle the buyer to terminate the Contract and recover any due diligence fee, earnest money deposit and reasonable due diligence costs. Or, the buyer could seek the remedy of specific performance and require the seller to perform the contract according to tits terms.
On the other hand, according to paragraph 6(a) of Form 2-T, the buyer takes title subject to Special Assessments approved following Settlement. Thus, if the assessment in question was being considered by the owners’ association but had not been approved by the time of Settlement, the buyer would take title to the property subject to it.
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