Don’t Pay a Middleman Escrow Fees

Question: In December 2000, I sold a condominium and paid $885 in “document transfer/preparation and HOA [homeowners association] escrow fees by management company,” $497 in “sub-association fees” and $625 in “master association fees” to the management company.

In May 2001, I bought another condo in the same development, and the sellers paid exactly the same fee amounts to the same management company for exactly the same documents.

In June, I sold the second condo and was charged identical fees for identical documents by the same management company.

For all three sales, documents were delivered directly to the buyer, and there were no changes in any of the documents. No additional labor was involved by the management company for either sale but the fees were the same. This cost me thousands of dollars.

The management company owner said the fees were part of the contract between his company and the association’s board of directors. He also said that when the board signed the contract, it agreed to let the company charge whatever fees it wanted to. No one supplied me with the actual costs to change any records.

The management company said that when I signed the real estate agent’s purchase agreement I placed an X in the “yes” boxes next to “pay HOA transfer fees” and “pay HOA document preparation fees.” I did not put an X in any boxes and I never received a notice of what these fees were when I signed the agreement.

The management company told me, “You agreed to it when you signed the purchase agreement, and there were no limits placed on the fee amounts,” and referred me to the escrow company.

Escrow referred me to the management company, and both referred me back to the board. The board ignores me.

I want a refund, and neither the companies nor the board want to deal with this. Can I obtain an accounting of what the management company charged me and a refund of these charges?

Answer: Management companies are not escrow companies. There is no law that says they must be the liaison between you, the homeowner association and your escrow company. By injecting themselves between you and the homeowners association, management companies create a middleman position at your expense.

These are fees homeowners don’t have to pay. Sellers can obtain and supply these documents on their own. Most homeowners automatically assume they cannot supply these documents to the buyer and to the escrow company, and that they need a management company to do it for them. They don’t.

The covenants, conditions and restrictions of most homeowner associations and Civil Code section 1368 require that copies of documents be provided to the buyer of a unit in a deed-restricted development, with the cost of providing them limited to the association’s “reasonable cost to prepare and reproduce the requested items.”

Subdivision (c) states that an association “shall not impose or collect any assessment, penalty, or fee in connection with a transfer of title or any other interest except the association’s actual costs to change its records.”

The law says the owner of the property being sold shall provide the buyer with the documents and that, upon request of the owner, the association shall provide them--charging only for the cost to prepare and reproduce them. It says nothing of a management company or other third party.

Write directly to the owner of the management company and ask for an accounting. Give the company 10 days to respond. If you do not receive a satisfactory answer, take your case to Small Claims Court requesting a refund.

Remember to demand as additional damages the $500 civil penalty and your attorney’s fees (the fees you would pay for a consultation with an attorney because an attorney cannot represent you in Small Claims Court). Costs are automatically awarded if you win.

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Stephen Glassman is a writer and an attorney in private practice specializing in corporate and business law. Donie Vanitzian, J.D., is a writer and arbitrator and manages commercial property. Both live in common interest developments and have served on various association boards. Please send questions to: Common Interest Living, P.O. Box 451278, Los Angeles, CA 90045 or e-mail your queries to: CID CommonSense@aol.com.