Arizona Association of Realtors and HOA Home Buyer's Rights

UPDATED 11/9/00
          "Residents in CIDS commonly fail to understand 
          the difference between a regime based formally on rights,
          such as American civil governments, and the CID regime,
          which is based on restrictions. This often leads to people 
          becoming angry at board meetings and claiming that their
          "rights" have been violated -- rights that they wrongly
          believe thay have in a CID." 
                                  . . . Privatopia, p. 148 


AAR Revised Purchase Form Improves Buyer Protection

The latest Arizona Association of Realtors residential purchase form, 5/00, provides an improvement for buyers of an HOA controlled property. This document, expanded from 8 to 9 pages, now specifically informs a buyer, on page 5 under Disclosures, that he/she has 5 days within which to cancel the contract after receipt of HOA information. This is an important improvement over the prior contract.

However, the above only applies if the HOA is less than 50 units. In paragraph (c) this wording is missing! Instead, the buyer is only informed that the seller will submit his name and address the HOA as a new buyer. It does not inform the buyer that:

1. the HOA is required by law to provide this information.
2. the buyer has the same 5 days within which he can cancel the contract.

Further, these contracts are provided by the real estate trade association and not approved or reviewed by any state agency, which is not disclosed to the buyer. This would make the buyer assume he couldn't change anything on the contract and not ask for a longer period of time to review these documents. Some of these documents can run over 100 pages and would require a lawyer to properly review.

I congratulate the AAR for the improvements, but they are still far too short of what can be done to protect a buyer, since AAR is well aware of the problems with HOAs.

Oct. 21, 2000

Limited Recourse & Protection

If, after you bought your HOA controlled property you begin to experience HOA problems not to your liking, or you feel violates your rights, your course of action is very limited! The common solution you are offered is: "You can always move out".

If you plan to buy a home in an HOA controlled property you should take steps to protect yourself before you buy:

  1. Ask for information from the seller and agent that you feel is material to your decision to buy, and which you will rely on. This information must be truthful and accurate. If not, you may have grounds for misrepresentation and for "making false statements" and thereby be able, through the courts, to invalidate the purchase contract.
  2. Ask the real estate agent and seller about any problems in the HOA or with the HOA's decisions or actions. You want to know about any and all problems that they have knowledge of and not just any the seller may have had. Have your agent put these requests in writing in the purchase contract.

  3. In Arizona licensed real estate agents/brokers are required to "deal fairly with all parties" and to disclose information "that materially and adversely affects consideration to be paid".

  4. Also, the purchase form used is probably an 8 page, small print AAR (Arizona Association of Realtors) form which is not reviewed or approved by the State of Arizona. AAR is not a governmental agency and its form can be modified, especially with respect to HOAs. Page 5 of this form contains information relating to ARS 33-1806 that requires the HOA or seller to provide certain information to the buyer. The buyer and seller are required to initial this page and the agent has no responsibility whatsoever regarding the seller's or HOA's compliance.

  5. Page 6 of the AAR purchase contract, under Buyer Reasonable Disapproval, has wording that allows you to cancel the contract "If buyer reasonably disapproves of items as provided herein ..." Caution is urged here -- seek legal interpretation. It appears that this section of the AAR form relates to physical items that the seller can remedy. It does not contain wording similar to that found on securities prospectuses and HUD planned unit development disclosures; such as "You have 10 days to review the HOA documents within which time you may cancel the purchase contract".

  6. Your real estate agent probably had you sign an Agency Disclosure agreement whereby he/she pledges his loyalty, honesty and fiduciary duties to his client - you. You rely on your licensed real estate agent and his pledge to protect you. This is another AAR form and not a governmental form.

  7. Since your agent is aware that there are problems with some HOAs, your agent should be protecting you by advising you to take the above steps.

  8. Ask yourself: "Do I want to live in this neighborhood under these conditions?"

Today, the courts hold buyers to the purchase contract even though the buyer has not seen or reviewed these important documents. The state does not review or approve HOA articles of incorporation or by-laws, which vary from association to association. Perhaps, today in Arizona, you do need legal advice to protect you.

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