HOA got sued right before closing. What are we required to disclose?
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HOA got sued right before closing. What are we required to disclose?
My condo’s HOA got sued by another homeowner while my unit was under contract.
The HOA had already filled out the form for the lender stating that there is no
pending litigation and we are set to close in a couple weeks. I just notified the
buyers, but are they required to notify the lender since the litigation status of
the hoa has changed a few days before closing? This is in the state of CO.
Asked on April 20, 2018 under Real Estate Law, Colorado
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 5 years ago | Contributor
The lender must be notified, but it is not the seller who is liable or resonsible to do this: it is the buyer, since they are the ones in contact with the lender, seeking money from the lender, and entering into a contract with them. If the buyer fails to notify the lender and the lender becomes aware of that omission or mistatement, the lender could potentially sue the buyer, based on fraud, to recover from them the proceeds of the loan. But it would be the buyer, not the seller, who would be liable, so long as the seller told the buyer as you did (though make sure you can prove you notified them; i.e. send them something in writing making them away, such as by fax or email, so you can prove delivery)--i.e. you could only be liable if you withhold the information from the party (the buyer) with whom you deal, but so long as you notify them, the burden then falls on the buyer to tell the lender. If the buyer is comfortable taking the risk of legal action against them later, that is their concern and choice.
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