Consider the impact of the following documents on your use and enjoyment of an HOA parcel before buying:
- Homeowner Association Records and Budgets. Financial or other governing entity documents include boards of directors meeting minutes minutes and financial statements. Even a simple three-member road, septic, or water system maintenance agreement should have financial records related to that maintenance. You need to ask for those records for your review and approval within the due diligence period negotiated in your real estate purchase contract, or be ready to live with the results after close of escrow. Look for financial records of funds held in reserve to assure capital maintenance can be completed without surprise special assessments. Monetary reserves for capital asset maintenance or replacement are not required in Montana. This means associations with physical assets to maintain, be they land or mechanical in nature, are better served with a portion of association dues going toward a reserve account in an amount sufficient to service the land or replace the physical asset at its projected end of life.
- Bylaws and Rules and Regulations. Applicable bylaws and rules and regulations of a homeowner or condominium association are other documents you may encounter. Montana Code Annotated section 70-23-307 requires condominium associations to record their bylaws along with any amendments.
- Articles of Incorporation. Articles of Incorporation are filed with the Secretary of State by incorporated, private non-profits (homeowner association or condominium) set up pursuant to the Montana Nonprofit Corporation Act, located in Montana Code Annotated (M.C.A.) title 35, chapter 2.
- Covenants, Conditions and Restrictions (CC&Rs) CC&Rs are equitable servitudes, which are private, contract-based land-use rules imposed upon all parcels in a residential or commercial subdivision. Equitable servitudes “run with the land” meaning that, regardless of whose name is on title, any land use restrictions survive the subsequent owner’s conveyance to a successor owner. Homeowner and condominium associations in Montana are generally subject to equitable servitudes.
- Hierarchy of documents. When purchasing in a homeowner or condominium association, look for an explicit explanation about what document controls in case of conflict between documents. For example, it may be stated that the CC&Rs control over the Articles of Incorporation, which in turn control over the Bylaws.
The exceptions section of your preliminary title report is the best first-step location of public-record documents affecting the use of and title to the property. Documents referenced in the preliminary title report will be found at the County Recorder’s office. Beyond the County Recorder’s office, there may be other federal, regional, state, or local agencies that have public records affecting your use and enjoyment of the parcel, such as your local planning office.
Conveyances of real property in Montana must be in writing. The Montana Association of Realtors has a set of forms to facilitate real property transactions, although other forms or contracts can be used. When someone is not willing to commit to a representation in writing, you must consider this is an immediate red flag.
Dual Representation. As in other jurisdictions, allowing a non-fiduciary real estate agent to represent both buyer and seller can lead to a conflict of interest that doesn’t serve buyer or seller.
III. Enforcing Purchase and Sale Agreements
Earnest monies. A seller may retain the earnest money he received in the event the buyer does not close. It is the preferred practice to deposit earnest monies for a real estate purchase and sales agreement with a neutral third party. This third party is usually the title company performing escrow services. Some real estate companies and contracts still allow the buyer’s or seller’s broker to hold earnest money funds prior to close of escrow. Even though statutory requirements applicable to how a real estate broker accounts for earnest money are relatively precise, when a neutral third party holds the funds a signed release by both parties usually facilitates contract termination without litigation.
Specific performance. The buyer will want the purchase contract to contain a “specific performance” provision. “Specific performance” means that a court can impose an equitable remedy through a court order to force the seller to sell the property to the buyer as contracted. In most breach-of-contract cases, money damages are the only remedy. Montana courts have long held that an order of specific performance is appropriate when a seller breaches a contract to sell real property, because each real property parcel is unique and money damages do not adequately compensate a buyer.
At Timely Contract, our primary legal services include: real estate contract review, real estate contract drafting, legal opinions for title insurance exceptions, and research, due diligence, and legal opinions for properties.
NOTE: This posting is not legal advice. This information is general in nature. Legal advice is based on specific facts.
See related article about real estate contracts in Montana.
At Timely Contract we have local real estate attorneys who have experience throughout Montana, including: Missoula, Billings, Bozeman, and Kalispell.