The Best of the Legal Hotline: HOA Q&A


 Tracy Rucka, WRA Director of Professional Standards and Practices  |    January 09, 2023
Hotline

A homeowners association (HOA) is a subdivision organization that creates and enforces rules relating to properties within its control. Generally, when a property is purchased within an HOA, the property owner automatically becomes a member of the HOA and is required to regularly pay fees. The rules and regulations, or covenants, for the HOA establish the power and authority of the HOA.

HOA, condominium or both? 

The potential buyer is looking at a property, and the buyer has seen references to “condominium” and “HOA” in property documents. How can the buyer be certain whether the property is part of a condominium or part of an HOA?

A property may be a condominium unit, part of an HOA or both. The best way to determine if there is a condominium is to check with the title company because what makes a condominium a condominium is the recording of a declaration of condominium as well as a condominium plat under the Condominium Ownership Act. See Wis. Stat. Chap. 703 for more details. 

If no such declaration and plat were recorded, the property is not a condominium. There may, however, be deed restrictions or covenants as well as an HOA that can impose rules or regulations. 

Seller disclosure  

The broker is taking a listing on a property in an HOA. What are the seller’s disclosure obligations?

Line F1 of the real estate condition report (RECR) requires disclosures about HOAs, and F7  requires disclosures about restrictive covenants:

F1. Are you aware of the property being part of or subject to a subdivision homeowners’ association?

F7. Are you aware of restrictive covenants or deed restrictions on the property?


At the time of the listing, it is prudent for the licensee to request and obtain copies of any HOA declarations, rules and regulations as well as any restrictive covenants on the property. Making such documents available to buyers in advance of offers will allow buyers with certain requirements the opportunity to review the use, appearance and related restrictions prior to making an offer. 

In addition, the WB-11 Residential Offer to Purchase refers to HOAs as follows on lines 355-358:

HOMEOWNERS ASSOCIATION If this Property is subject to a homeowners association, Buyer is aware the Property may be subject to periodic association fees after closing and one-time fees resulting from transfer of the Property. Any one-time fees resulting from transfer of the Property shall be paid at closing by (Seller) (Buyer) [STRIKE ONE] (“Buyer” if neither is stricken).

Document review   

The buyer has an accepted offer on a townhome that is part of an HOA. How are HOA disclosures to be delivered to the buyer? Are the HOA disclosures similar to condominium disclosures in which the buyer has a right to rescind the offer?  

If the property is not a condominium, any Wis. Stat. Chap. 703 laws would not apply to the disclosure documents. In a transaction with HOA rules and regulations, the buyer may wish to review the HOA documents before writing the offer. Alternately, the buyer may draft an offer subject to a review of the HOA documents. If a review contingency is used, the buyer will want to include a time for review and a standard for objecting to the documents to assure an enforceable contingency.  

The buyers have an accepted offer on a home. On the RECR for the listed property, the box for line F1 is marked “no.” The appraisal was conducted, the closing is scheduled, and the buyers have received a welcome letter from the HOA, including the covenants along with a bill for the pending property transfer. The buyers are concerned about some of the rules in the covenants. Do they have a legal recourse at this point?  

If the seller failed to disclose the HOA, the buyer may have a misrepresentation claim based on the seller’s failure to disclose. Alternately, the buyer may have recourse via the title provision of the offer given the undisclosed restrictive covenants or deed restrictions. Whether the buyer and seller negotiate based on the information, agree to cancel the transaction, or proceed notwithstanding the information is a matter for discussion with their attorneys.  

Signs, signs, signs  

Can an HOA prohibit the display of political signs in yards? 

Yes, an HOA could impose such restrictions. The First Amendment would not apply to policies of an HOA because an HOA is not a governmental agency.  

If the property is both in an HOA and the form of ownership is a condominium, Wis. Stat. 703.105 prohibits the condominium from adopting a bylaw, rule, declaration or deed prohibiting a unit owner from displaying in their condominium a sign that supports or opposes a candidate for public office or a referendum question. The condominium statute also allows for the respectful display of the United States flag. The condominium association may, however, regulate the size and location of signs, flags and flagpoles.

What are the laws for placing “for sale” signs by real estate licensees? Can the HOA limit placement? 
 
The authority to regulate the placement of real estate signs is multidimensional and depends on the location of the property. A broker must take into consideration the following: the type of road, consent of the property owner, any applicable subdivision, HOA rules or restrictive covenants, applicable condominium rules, the municipality, the county and the state Department of Transportation. 
 
General information about outdoor advertising is available from the Department of Transportation at wisconsindot.gov/pages/doing-bus/real-estate/outdoor-adv/default.aspx

Wis. Admin. Code Chap. Trans 200 would apply if the property was on a state highway. See docs.legis.wisconsin.gov/code/admin_code/trans/200.pdf

Wis. Admin. Code § Trans 201.17 specifically addresses real estate signs visible from the interstate. See docs.legis.wisconsin.gov/code/admin_code/trans/201/17.
 
The municipal and county zoning ordinances may also be reviewed. In the event there is a condominium, HOA or restrictive covenants, the property owner may obtain these for review.

Service animals and HOAs  

A specific HOA’s covenants state no dogs or cats are allowed. The potential homebuyer is blind and has a service dog. The HOA is saying it must vote to amend the covenants to allow a change for the accommodation of the blind buyer’s service dog. Is this discrimination under fair housing law? How to proceed?
 
The federal Fair Housing Act protects the right of people with disabilities to keep a service dog even when an HOA rule or policy explicitly prohibits animals altogether or imposes breed restrictions. The law generally requires the association to make an exception to the breed restriction or no-pet policy as a reasonable accommodation as long as the accommodation does not constitute an undue financial or administrative burden for the HOA or fundamentally alter the nature of the housing. A reasonable accommodation is a change in rules, policies, practices or services so that a person with a disability will have an equal opportunity to use and enjoy a dwelling unit or common space. Support and service animals that assist persons with disabilities are considered to be auxiliary aids and generally are exempt from an owner’s pet restrictions, pet deposits and extra pet rent. Service animals include, without limitation, guide dogs for people with vision impairments, hearing dogs for people with hearing impairments, and emotional assistance animals for people with chronic mental illness.

See “Sorting Through Assistance Animal Requests,” in the March 2020 Wisconsin Real Estate Magazine at www.wra.org/WREM/Mar20/AssistanceAnimals and the sources cited therein for the latest guidance regarding this issue. 

Also see these additional resources:

Modification of documents

A potential buyer does not like some of the provisions contained in the HOA covenants and bylaws in regard to fences and parking vehicles. The buyer drove around the neighborhood and saw many fences that appear to be in violation of the standards. How might this potential buyer go about getting the documents modified?  

The starting point is to have the documents in question reviewed by legal counsel. Generally restrictive covenants, including a declaration of covenants for an HOA, may be amended or released if all the owners of land benefited by the covenants agree. The covenants may be reviewed to determine how, if allowed, amendments may be accomplished. The potential buyer may also make a claim that the covenants have not been enforced or there has been arbitrary enforcement. If there was a change in the nature of the properties subject to the covenants, they may be unenforceable. There is also a potential statutory process available in certain circumstances when the area involved is all or part of a city, village or town block, by which a party may petition the circuit court for removal or change in restrictive covenants set forth in Wis. Stat. § 847.03 at docs.legis.wisconsin.gov/statutes/statutes/847.pdf. The process includes giving notice to all affected landowners and an opportunity to object and may not apply to all restrictive covenants.

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