Estoppel Certificates: Stop the abuse

On July 1, 2017 the Florida legislature enacted laws that govern the issuance of statements from condominium, cooperative and homeowner associations in connection with the sale and purchase of interests therein, called #Estoppel #Certificates hereinafter "certificates.". The primary purpose is to inform the buyer of any outstanding assessments that could be superior to the property interest that is purchased. The association is prevented from, or estopped from claiming that additional amounts are due other than as disclosed.

The reason for the laws is to set standards for the method, time, and costs involved in the issuance and receipt of certificates. Upon request by an owner, or agent, such as a title company or lawyer, the association or it's agent must provide, among other things, the amounts due prior to closing. the applicable fee standards are as follows: "An association or its authorized agent may charge a reasonable fee for the preparation and delivery of an estoppel certificate, which may not exceed $250, if, on the date the certificate is issued, no delinquent amounts are owed to the association for the applicable parcel. If an estoppel certificate is requested on an expedited basis and delivered within 3 business days after the request, the association may charge an additional fee of $100. If a delinquent amount is owed to the association for the applicable parcel, an additional fee for the estoppel certificate may not exceed $150." Click for the full text of the law as stated in s. 720.30851 Fla. Stat.

One reason why the legislature deemed it appropriate to regulate the timing and cost of certificates is that anecdotally, some providers of similar documents used as payoffs (even if no monies were outstanding at the time of closing) were charging far higher fees for the documents, without which no closing can take place. The law is clear and has no exceptions for any other charges in connection therewith.

Notwithstanding the lack of legal authority to impose any fees or charges other than the ones above and expressed by statute, I have reviewed many certificates and found that they may be within the absolute limits allowed, but include such charges as a "convenience fee" presumably to offset the credit card charges imposed when payment is demanded before issuance by the association or its' agent. I have also seen charges imposed by third party providers of such information. Of more concern are fees payable directly to management companies often for a hundred dollars or more, with no legal justification or authority.

This practice is widespread, included on over 80% of a very limited sample of certificates I reviewed recently. When I asked the CEO of a management company why the additional amounts were added, he replied, more or less: "That's to offset our costs in putting the new owner in our system and setting up the account." One might think that was what the stated charges in the law are for, but I think it's fair to observe that nobody wants to stop the sale of any property over a seemingly trivial amount of money in the grand scheme of things. I have dealt with scores of management companies in almost 40 years of specializing in this field of law, and many of the CAMS who do not charge these fees have told me that they are upset, and even angry that others are, in their eyes, profiting from an abuse of the system.

To provide some perspective, and I believe my figures are conservative, there are over 4 million such properties in Florida. About ten percent of them change hands every year, so that's 400,000 transactions. Let's just say that half have these fees added at the amount of $100. That's $20 million a year each year since July 1, 2017, or about $70 million by now. That is a lot of money and adds a lot of friction in the system, especially when there is lack of bargaining power as noted above.

The Florida land Title Association has been asking for examples of such charges to be forwarded to them. If you know of such charges, please forward them to Leonard Prescott, [email protected], and Melissa Murphy at [email protected]. The need to address these charges and those charging them is pressing and urgent.