Condominium ownership is desirable for many consumers who have decided they are done with the headaches and backaches of snow removal and mowing the lawn. In condominium ownership, all unit owners act together as a group to manage the condominium and maintain the common elements in accordance with the bylaws and declaration. Or perhaps they hire a manager to do that for them.
An association assesses unit owners for funds for the upkeep of the common elements, administrative expenses and reserves for future capital improvements. Assessments are levied in proportion to the unit owners’ percentage interests in the condominium and in accordance with the budget. These assessments are often referred to as “common assessments” and generally are paid monthly. So far so good: unit owners pay set monthly fees based on a budget, unless the association levies one of those pesky special assessments that are typically an unpleasant and costly surprise.
If the condominium unit owner has decided the time has come to sell and move on, of course he comes to you — the trusty, friendly real estate professional, to assist with this process. With a smile on your face and an inward groan, you bring out your list of the documentation that the seller will need to produce to complete a residential condominium sale. You pull out the WB-4 Residential Condominium Listing Contract and look at the list of the required and optional condominium disclosure materials that will need to be provided. Well, at least the required documents can be obtained from the association as stated in Wis. Stat. § 703.20 if you give the 10 days’ notice, right?
There’s a fee for that!
If the seller asks the association to provide the required condominium disclosure materials, this may be the unit owner’s introduction to the wonderful world of extra condo fees. Possibly unbeknownst to the unit owners, either the condominium association or the condominium manager may have set up a schedule of fees for providing various documents and reports a condominium seller needs for a successful transaction. In order to dispel some of the mystery and surprise that some unit sellers might experience, 2017 Wis. Act 303 was enacted to provide some transparency with regard to fees for the disclosure documentation, fees for the payoff statement and transfer fees. In addition, the legislation strives to provide some limits or ceilings for these fees that otherwise can be quite steep.
Regarding the condominium disclosure documents, Wis. Stat. § 703.20(2) now requires a written request to the association and states that when providing the disclosure materials, the association may charge the actual costs of furnishing the information or $50, whichever is less, except that the fee may be higher if established under the prescribed procedures now set forth in the statutes. If there is a change in any delivered document that materially affects the rights of a buyer, then that amendment may be delivered at actual cost or $15, whichever is less.
Establishing fees charged by the association
Although there is a $50 maximum fee stated in § 703.20(2), that provision also indicates a higher fee may be charged if it was established under the new provisions of Wis. Stat. § 703.205. If the association is going to charge more than $50 for providing the condominium disclosure materials, a specific process must be observed. If the association is going to establish a fee more than $50 or increase the current fee to an amount over $50, then the association must first provide written notice to the unit owners at least 48 hours before any meeting where such a fee increase will be considered. The 48-hour advance notice requirement also applies if the association is considering entering into a condominium management contract or agreeing to modify an existing management contract that allows the manager to begin charging a fee over $50 or allows the manager to increase the existing fee to an amount over $50. If any of these actions are taken by the association, then the association is to adopt a written resolution documenting the action taken, and within 48 hours, provide written notice to the unit owners describing the fee established or the fee increase. The same procedure must be followed regarding charges made for providing the unit payoff statement.
Payoff statement for unpaid assessments
The new Wis. Stat. § 703.335 creates a process for the unit owner’s request for a payoff statement as well as fee and damage parameters. The “payoff amount” means the total amount necessary to satisfy all monetary obligations, including unpaid assessments, owed by a unit owner to the association in connection with a particular unit, as set forth in a payoff statement provided by the association.
A unit owner, the buyer or a person on behalf of a unit owner, may submit to the association a written request for a payoff statement as of a specified date not more than 30 days after the request is submitted. This date would generally be the closing date. The association has 10 business days after the request is submitted in which to furnish the payoff statement. The association is to furnish one payoff statement every two months without charge, unless higher fees have been established under the § 703.205 process that is also used for the disclosure materials fee, and no more than $25 for any additional payoff statements requested within two months. If an association does not provide a payoff statement within the 10-business-day time frame, the association is liable to the unit owner for any actual damages caused by the association’s failure or $350, whichever is less.
The last unit sale-related fee addressed in 2017 Wis. Act 303 is the transfer fee. The transfer fee is the fee imposed by the association or the condominium manager in connection with the transfer in ownership of a condominium unit. The act does not regulate this fee, but it is addressed in the additions made to the content of the Executive Summary.
Executive summary revisions
To create an information source regarding some of these transaction-triggered fees, the act adds to the information content of the Executive Summary. Remember that the Executive Summary ideally reaches the buyer fairly early on as the Executive Summary is an attachment to the Condominium Addendum to the Real Estate Condition Report (RECR), which is attached to the RECR.
The Executive Summary serves as an index for the oftentimes voluminous disclosure materials provided to condominium buyers. This user-friendly index summarizes the most important information buyers want or need to know about a condominium — such as the rules for pets, parking and rentals — or directs them to the sections of the disclosure materials where that information is found. The Executive Summary promotes buyers’ understanding of a purchase by creating an easy-to-read summary of important disclosure material information or a consumer-friendly index to the disclosure documents at the point of purchase. The Executive Summary includes information regarding identification of the condominium, association governance, parking, pets, unit rentals, special amenities, unit repair and maintenance responsibilities, common element and limited common element maintenance, repair and replacement responsibilities, reserves, fees on new units, expansion plans, unit alterations, amendments and other restrictions or features.
The declarant or the association — whichever is in control — is responsible for preparing the Executive Summary and revising it whenever a change in the underlying disclosure materials necessitates a corresponding revision to the Executive Summary, per Wis. Stat. § 703.33(1m).
Agents should be careful whenever they are working with a small condominium with 12 or fewer units because the declaration may authorize the use of abbreviated, streamlined disclosure materials that do not include an Executive Summary. It is always prudent to contact the association for a copy of the current condominium disclosure materials, but this is particularly true with small condominiums that may use streamlined disclosure documents and may not need an Executive Summary.
Effective July 1, 2018, the Executive Summary is to state the date when it was prepared or revised. The Executive Summary is also to state the amount of reserves maintained by the association — as of the preparation or revision date indicated — and whether the condominium association has a right of first of refusal. The language in the statute refers to “first right of purchase,” but that is referring to the same situation where the association has the first right to buy a condominium unit upon the terms and conditions offered by another buyer. Typically, the association will have the right to match the price, terms and conditions offered by another buyer. The Executive Summary also is required to indicate if there is a transfer fee charged, and if so, the amount; if there is a fee for providing the required condominium disclosure materials, and if so, the amount; and if there is a fee for providing the payoff statement, and if so, the amount. These amounts will be current as of the date when the Executive Summary was prepared or revised, as stated on the Executive Summary.
Condominium executive summary update 2018
The WRA’s optional Executive Summary form has been updated to comply with the new legislation. The revised Executive Summary form includes the new legislatively required items: the date of preparation, the amount in reserves, whether the association has a first right of purchase, any transfer fee, any disclosure material fee and any payoff statement fee. Associations and attorneys by no means have to use the WRA's Executive Summary form; it is simply available for those who wish to take advantage of filling out a form instead of creating their own. The updated WRA Executive Summary 2018 form is available on the WRA’s condo law resources webpage at www.wra.org/CondoLaw and is available in zipForm.
Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.
Resources
2017 Wis. Act 303: https://docs.legis.wisconsin.gov/2017/related/acts/303.pdf
Condo law resources page on the WRA website: www.wra.org/CondoLaw