The Maryland Real Estate Commission has made a new decision on the HOA or Condo Document Cancellation of Contract deposit rules and shared that change on August 23, 2010.
In the past, if a buyer canceled their contract of sale due to an issue with the Homeowners Association Documents or Condominium Association Documents, both the buyer and the seller had to sign a release of deposit in order for the buyer to receive their good faith deposit back.
This seemed to be in misalignment with the contract of sale, which says, in essence (from the Maryland Association of REALTORS Governmental Affairs News site):
A buyer who enters into a contract but who has not received the required HOA documents and disclosures may cancel the contract any time before closing, and is entitled to “immediate return of deposits made on account of the contract.” Real Property Article 11B-108(a). A buyer who does not receive the HOA documents and disclosures at least five days prior to entering into the sales contract is entitled to cancel the contract within five days of receiving the documents and disclosures. The buyer need not state any reason for canceling the contract, as long as the cancelation is in writing. The buyer is entitled to the “return of any deposits made on account of the contract, except that the vendor shall be entitled to retain the cost of reproducing” the documents and information disclosed to the buyer. Real Property Article 11B-108(b).
A purchaser who enters into a contract of sale to purchase a condominium is entitled to cancel the contract within 7 days of receipt of the required documents and disclosures and is thereafter entitled to “return of any deposit made on account of the contract.” Real Property Article 11-135 (f).
In the past, Brokers had not legally been allowed to release monies from the escrow accounts:
until a transaction is consummated or terminated, written instructions from the parties are received, an interpleader is filed in court or neither party objects to the broker’s proposed disposition of the deposit. Business Occupations Article 17-505 (a). Following this new policy statement by the Real Estate Commission, a broker may return the buyer’s deposit once written notice to cancel the contract is given.
This is a big change benefiting buyers, and I am curious to see how it will effect Maryland real estate transactions in the future. Maryland condo owners and homeowners with HOAs need to be aware of these changes, and should order their documents when they begin to market their homes so as to have them available to buyers once they go under contract. Check with your HOA how long the documents are valid, though, and if you can order updates.
Contact me to help you navigate the new changes in Maryland HOA home sales!
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