The Rhode Island Condominium Act (“The Act”) at Section 4.09 requires a unit owner (unless exempted by statute) to provide a purchaser, “before execution of any contract for sale of a unit, or otherwise before conveyance,” with a certificate containing 12 items:
- A statement disclosing the effect on the proposed disposition of any right of first refusal or other restraint on the free alienability of the unit;
- A statement setting forth the amount of the monthly common expense assessment and any unpaid common expense or special assessment currently due and payable from the selling unit owner;
- A statement of any other fees payable by unit owners;
- A statement of any capital expenditures anticipated by the association for the current and two next succeeding fiscal years;
- A statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specified projects;
- The most recent regularly prepared balance sheet and income and expense statement, if any, of the association;
- The current operating budget of the association;
- A statement of any unsatisfied judgments against the association and the status of any pending suits in which the association is a defendant;
- A statement describing any insurance coverage provided for the benefit of unit owners;
- A statement as to whether the executive board has knowledge that any alterations or improvements to the unit or to the limited common elements assigned thereto violate any provision of the declaration;
- statement as to whether the executive board has knowledge of any violations of the health or building codes with respect to the unit, the limited common elements assigned thereto, or any other portion of the condominium; and
- A statement of the remaining term of any leasehold estate affecting the condominium and the provisions governing any extension or renewal thereof.
The association must furnish this certificate to the unit owner, within 10 days after a request by the unit owner. Just last year, legislation was passed that specifically provided for a civil penalty, in addition to any remedies otherwise allowed pursuant to the Act, of “not less than one hundred dollars ($100) nor more than five hundred dollars ($500) per occurrence” for failure to provide the certificate within 10 days of a written request.
Resale Certificate Cost
Now, this year the focus is back on the resale certificate. Legislation was before the House Judiciary Committee in February that sought to limit the fee charged for the preparation of a resale certificate to no more than $125.00. The Act at Section 3.02 (12) specifically gives Executive Boards the power to, “impose reasonable charges for the preparation of … resale certificates required by Section 4.09.” Currently the charge for preparation of a resale certificate ranges from an average of $150-$350.
The Act is a consumer protection statute, and the purpose of the resale certificate is to protect the unit purchaser. The document also, however, protects the association and is, among other things, a snapshot of the association’s lien on a particular unit. The ability of the board to impose a fee at its discretion for this process is important and must be upheld because the consequences to an association for a shoddy product can be great. For example, the purchaser is not liable to the association for any items or amounts that are missing from the resale certificate. The information required for the resale certificate can take a great deal of time for a board (or, if applicable, property manager) to prepare, particularly if there are lawsuits or budget shortfalls. It is important that these documents not be rushed. Therefore, it makes sense that there is fair compensation for the necessary time put into preparing an accurate product.
Based on the foregoing, the CAI Rhode Island Legislative Action Committee (RILAC) submitted written and oral testimony to the House Judiciary Committee to oppose the bill. The efforts of RILAC were successful and for now, the measure was not recommended for passage, and was instead held for further study. Hopefully, the importance of this document has, at least for now, been impressed upon the state representatives. It is important that boards and managers also take this as a reminder to ensure practices are in place for timely and accurate compliance with the statutory resale requirement.