By: Michael Rome, J.D.
This article is not a substitute for consulting with legal counsel in your State regarding the specific fact situation.
Some purchasers in Georgia have no idea that they have bought a home in a mandatory community association. How could this happen?
The first thing to understand is that there is no affirmative duty in Georgia on the part of the seller, real estate agent, mortgage company, or closing attorney to inform the buyer that their property is part of an association. This, in spite of the fact, that many of the standard disclosure forms for sellers contain sections covering questions about whether the home is in an association.
These standard seller disclosures are attached to the real estate sales contract, and also encourage the seller to give copies of the covenants, rules, and bylaws to the buyer.
Thanks to the Georgia Association of Realtors, these types of disclosure forms are becoming the norm. Unfortunately, the presence of questions on the disclosure form about the existence of an association do not in and of themselves create a legal duty on the part of the seller.
If the seller does not disclose that there is a mandatory association, wouldn't the purchaser be informed at closing? Not necessarily. Although the closing attorney conducts a title search, the search does not always reveal the association. This is because some title examiners do not search for the Declaration of Covenants. They simply look at the last Security Deed to see if it included a "Planned Unit Development (P.U.D.) Rider" or a "Condominium Rider."
The Rider is a document that the mortgage company requires to be signed by the purchaser. The provisions state that the purchaser will obey all the covenants & rules of the association, in addition to paying any assessments and fines. It also provides that if the buyer does not pay dues or fines, the mortgage company can pay and assess them against the homeowner. If the Rider is absent from the first Security Deed, a property can exchange hands many times without a title search revealing the existence of an association.
The recorded Declaration of Covenants that create the association "run with the land.' This means that the purchaser is considered to have constructive notice of the homeowner association. Therefore, the covenants are binding on the homeowner whether or not they actually knew of them, and whether or not they signed a Rider.
This whole problem is compounded by the fact that some communities do not have any amenities (such as a pool) that would help indicate the existence of the association. I recently started helping such a community and discovered that there were no P.U.D. Riders for about twenty-five percent of the lots. I have suggested to the association that they erect an exit sign. The sign could indicate the existence of a "permanent membership' association, along with contact information.
The problem of some purchasers not being aware they are buying into a mandatory association will continue until laws are developed that require the seller to disclose this type of information to the buyer.