Property Listings & Residential Purchase Agreement: How to Check the Right Box
Anyone selling a lot or home that is part of a Property Owners’ Association (POA) is responsible for providing potential lot purchasers with information about the POA, referred as a “disclosure packet.” Sellers rely on their associations to provide complete and current disclosure packets to prospective purchasers. If a POA is managed by a POA manager, the POA’s contract with the manager typically gives the manager this responsibility.
It’s not always obvious that a property is or is not part of a POA, so it’s a good idea for the seller to know and to share this information with his realtor. A purchaser’s first clue that a property is part of a POA comes from the property listing prepared by the seller’s realtor. And, of course, the residential purchase contract must disclose whether or not the property is part of a POA.
Unfortunately, sometimes sellers and realtors are not sure which box to check when preparing property listings and residential contracts. To avoid unintentional misrepresentation, here are some guidelines from the Virginia Code:
The Virginia POA Act does not apply to every subdivision subject to a recorded declaration. It applies only to “developments” (a defined term) subject to a “declaration” (another defined term) initially recorded after January 1, 1959 and to subdivisions created under the former Subdivided Land Sales Act (§ 55-536 et seq.), which is superseded by the POA Act.
The following five elements must be present for a “development”:
- lots, at least some of which are
- residential or recreational;
- common area;
- automatic membership in an association; and
- (potential) obligation to pay assessments.
And, a “declaration” must do one or both of the following:
- impose responsibilities on the association to maintain or operate the common area; and/or
- give the association authority to impose on lots or their owners a mandatory obligation to pay money in connection with such responsibilities. (I stress “authority” because sometimes an association may have the authority but not have a regular assessment in place.)
So, even if a neighborhood looks like a development and is subject to a recorded declaration, it is not a “development” for purposes of the Property Owners Association Act unless each lot owner is a member of an association, the association has a duty to maintain common area, and the declaration gives the association the power to charge mandatory assessments against the lot owner.
