The “Estoppel Law”

Mon 7th Aug, 2017 | Blog by Michael Michetti

By: Morgan Hila, Esq.

On June 14, 2017, Florida Governor Rick Scott signed Senate Bill 398 pertaining to Estoppel Certificates into law effective July 1, 2017. The new law modifies the previous requirements relating to the issuance and expiration of estoppel certificates, substantially amending Chapter 719 of the Florida Statutes governing cooperatives, Chapter 718 of the Florida Statutes governing condominiums, and Chapter 720 of the Florida Statutes governing homeowners’ associations.

Customarily, estoppels detail unpaid fines, open fees, and special assessments associated with the property. This new law overhauls almost all areas of the existing statutory requirements concerning the issuance of these estoppels.

Estoppel certificates are due diligence documents produced by homeowner’s associations prior to the closing of a purchase and sale to establish critical information regarding the property owner’s standing with the association.

Estoppel Fees

Previously, homeowners’ associations, cooperatives, and condominium associations followed their own separate requirements for providing estoppel certificates to closing agents. The prior law did not limit or regulate the amount that an association could charge to prepare an estoppel certificate, allowing associations to charge a “reasonable” fee. Additionally, the statute failed to outline the information that associations would be required to include in an estoppel. As a result, parties to a transaction were paying high fees to obtain incomplete estoppels. Additionally, there was no consistency to the fees being charged. Fees are now capped at $250, with an additional $150 charge if there are delinquent fees. Upon the request for a rush estoppel certificate, an extra fee of $100 may be added to the cost. Associations are now prohibited from charging fees for amended certificates. Fees above and beyond the statutory cap may be charged but the association may be required to reimburse the charged party if the transaction does not close. The introduction of the fee cap restricts associations from charging exorbitant fees for estoppels and creates some level of consistent fee expectation among closing agents and parties to real estate transactions.

Estoppel Timing Regulations

In the past, the estoppel certificates could be valid anywhere from 15-45 days depending on the association. Florida law now mandates that all estoppel certificates shall be valid for a period of 30 days from the date of issuance. In the case that an amended estoppel certificate is issued, the 30-day period begins on the issuing date of the amended estoppel. Associations are now required to issue estoppels within 10 business days of a written or electronic request. If the estoppel certificates are not delivered within that timeframe, the association is forbidden from charging a fee.

Association Content Requirements

The new law makes associations more accessible, requiring each association’s website to designate the entity and address to contact for estoppel certificate requests. Estoppel certificates may now be completed by any board member, authorized agent or authorized representative of the association, as opposed to previously requiring the signature of exclusively an officer or agent of the association. Additionally, the law now establishes universal requirements for the information that all three types of associations must provide in the certificate.

The institution of this new estoppel law will create a uniform process reducing inefficiency and streamlining the path to closing real estate transactions. To ensure the smoothest possible outcome, it is in the best interest of the parties to work with a real estate attorney well versed on the applicability of the law to their specific transaction.

WWM&R associate Morgan Hila, Esq., practices in the areas of commercial and residential real property transactions, construction, corporate and commercial lending.