The primary purpose of a homeowner’s association (“HOA”) is to provide maintenance to common areas and protect property values within a community, typically accomplished through bylaws, rules/regulations and declaration of covenants, conditions and restrictions. A seller of a lot subject to an HOA must disclose such to a buyer and provide a disclosure packet in accordance with Virginia Statute.
These disclosures may be provided after the Parties to a real estate transaction have a fully ratified contract in place. Where this is the case, delivery of the disclosure packet must satisfy both Virginia’s Property Owner’s Association Act (“POAA”), as well as any relevant delivery requirements outlined in the Parties’ contract. For instance, if you’re using a form document, such as the Northern Virginia Association of Realtors (NVAR) Residential Sales Contract, the unmodified Agreement allows the parties to specify how HOA disclosures are to be delivered. The Parties’ must abide by any such terms that are called for by the ratified contract.
Issues can arise, however, when a seller seeks to provide the required HOA disclosures prior to contract ratification, more specifically, by uploading these documents onto the Multiple Listing Service (“MLS”). This raises at least two interesting questions which are addressed in further detail here: (1) whether uploading HOA disclosures onto the MLS prior to contract ratification constitutes valid delivery for the purposes of Virginia’s POAA; and if so, (2) whether it takes away a buyer’s right of cancellation. These inquiries have very important implications for the rights and responsibilities of buyers and sellers in a real estate transaction
Since this matter has yet to be brought before a Virginia court, it’s difficult to determine where the court would stand on the issue. That said, they would undoubtedly begin their analysis by looking at the relevant statute. § 55.1-1808 of the Virginia Code outlines the disclosure obligations and cancellation rights of parties involved in the transfer of real property subject to a Property Owners’ Association (aka HOA) in Virginia. The relevant portions of the Code, for the purposes of this question are:
§ 55.1-1808(B)(ii) which states “the Property Owners’ Association Act requires the seller to obtain from the property owners’ association an association disclosure packet and provide it to the purchaser”;
§ 55.1-1808(B)(iii) which states “the purchaser may cancel the contract within three days, or up to seven days if extended by the ratified real estate contract, after receiving the association disclosure packet…”; and
§ 55.1-1808(D) which further adds, that if the purchaser receives the association disclosure packet on or before the date the purchaser signs the contract, “the purchaser may cancel the contract (i) within three days or up to seven days if extended by the ratified real estate contract, after the date of the contract…”
These establish the timeline for a buyer’s right to cancel pursuant to the POAA . Namely, where a buyer receives the HOA disclosure packet prior to submitting a signed offer, they have three days following the contract date, rather than the date of receipt, to exercise their cancellation rights under § 55.1-1808. This cancellation period can be extended up to a total of 7 days if agreed to in the ratified contract between the parties. Given the language in the statute, uploading the HOA disclosures to the MLS would not take away a buyer’s right of cancellation and such right would begin to run from the date of the contract.
That leaves us with the question of – does uploading HOA documents onto the MLS constitute valid delivery under § 55.1-1808 of the Virginia Code? The answer requires a two-step analysis. First, does delivery of documents through the MLS constitute an “electronic means” as this term is defined under the Statute? Second, does it constitute valid delivery in accordance with the requirements of the Statute? The relevant portions of the Code, for the purposes of these questions are:
§ 55.1-1808(D)(ii) which specifies that the disclosure packet must be “hand delivered, delivered by electronic means, or delivered by a commercial overnight delivery service or the United States Postal Service, and a receipt is obtained…”;
§ 55.1-1800 which defines “electronic means” as “any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient of such communication…” (emphasis added); and
§ 55.1-1808 (D)(3) which clarifies that electronic means is only sufficient where “the sender retains sufficient proof of the electronic delivery, which may be in the form of an electronic receipt of delivery, a confirmation that the notice was sent by facsimile, or a certificate of service prepared by the sender confirming the electronic delivery.”
Given the broad parameters created by the use of the word “any” when defining what qualifies as an “electronic means”, transmission of documents through the MLS would qualify as an electronic means of communication under the POAA, assuming it creates a record that may be retained, retrieved and reviewed by the recipient. The language of the relevant Code provisions further indicates that uploading the HOA disclosure packet onto the MLS arguably constitutes valid electronic delivery if it were accompanied by some proof of delivery to the specific buyer or the buyer’s authorized agent.
As to the questions presented, it is advisable that parties take a conservative approach – uploading HOA disclosures to the MLS, while possibly compliant with Virginia’s Statute, is not a best practice. And, when dealing with what is typically a buyer and seller’s largest asset, their home, it’s better to have certainty around this issue. Where the circumstances result in the HOA disclosure being provided prior to contract ratification, remember to bear in mind the impact this can have on the timeline of the buyer’s right to cancel the contract pursuant to the POAA.