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1. What is the amount of the assessment?

One percent (1%) of the gross sales price.

2. Who pays the assessment?

The Seller.  However, a Buyer and Seller can agree otherwise.

3. Should the assessment appear on the title commitment?

Yes. The assessment obligation will appear on a properly prepared title commitment or abstract of title, just like other covenants, conditions, restrictions and encumbrances.

4. Should the assessment appear on the HUD-1 closing statement?

Yes.   Typically on line 1300. See example.

5. Where should payment be sent?

Payment should be sent to the servicing agent, as follows:

IF BY MAIL
Covenant Clearinghouse
P.O. Box 6193
Round Rock, TX 78683-6193

IF BY WIRE TRANSFER
Contact Us

6. Which title companies have closed transactions with the assessment?

Agents for every major title insurer, including Fidelity National Title, Independence Title, North American Title, Chicago Title, First American Title, Stewart Title, Alamo Title, Commonwealth Title, Old Republic Title, and more.

7. Do some title companies knowingly refuse to collect the assessment?

No.  Closing a sale without ensuring that all claims are satisfied would generally violate a lender’s closing instructions, and give rise to a title insurance claim.

8. What happens if an assessment is not paid?

Depending on applicable state law, unpaid assessments generally will be secured by a superior claim or lien against the property (senior to the mortgage), and will accrue interest until paid.

9. Does every transfer of title require payment of the assessment?

No. Generally speaking, a transfer of title between spouses, a sale to a government entity, a transfer of title in connection with foreclosure, and certain other limited exemptions described in the Declaration of Covenant are exempt from payment of the fee. (The foregoing is a general description. Please refer to the specific instrument that imposes the fee, generally in Section 6).

10. Does a short sale require payment of the assessment?

Yes.

11. Does a Deed in Lieu require payment of the assessment?

Yes. A Deed in Lieu of foreclosure is not a foreclosure.

12. Is the assessment due in connection with a refinance?

Typically, no.  A refinance has no Gross Sales Price, and therefore the assessment would be zero.  However, in the event a prior transfer of title resulted in an unpaid assessment, the amount due will need to be satisfied in order to ensure the refinancing lender has a senior security interest in the mortgaged property.  Contact us for clearance prior to closing.

13. What are the most common title company mistakes in closing a transaction with an assessment?

In general, closings occur smoothly.  However, the most common mistake is failing to contact us before relying on a purported release or termination, which may not satisfy all of the requirements of the encumbrance instrument.

The majority of title claims which have been paid for missed assessments have arisen from the title insurers:

(a)  Failure to identify that a “termination” or “release” failed to satisfy all necessary requirements.

(b)   Mistaken conclusion that foreclosure discharged the assessment encumbrance. 

13.   Will the property always be encumbered by the assessment?

No.  The assessment obligation will expire, typically in 99 years or less.   

14.  99-years seems excessive. Why so long?

Statistically a given property will sell an estimated 8 times during a 99 year period, generating just 8% in total assessments over the 99-year life of the assessment.  (In comparison, during this same period real estate commissions would be an estimated 42-60%).

The assessment is payable only at the time of sale (not annually) and is one of the lowest expenses a homeowner will incur.

The funds not only reimburse developers for expenses such as streets, utilities and other public improvements that are deeded to the cities and municipalities, and used by the homeowners, but five percent of the assessment goes to non-profits operating in the community.  Studies have shown that communities with stronger public services and benefits enjoy higher property values, providing a direct correlation between the assessment income and the encumbered property. 

15.  How do we know whether or not there are any unpaid fees?

We can help identify any unpaid fees. Simply fill out the inquiry form.

16.  Where can we read more about these assessments?

An in-depth discussion can be found Here. However, always rely on legal advisors of your own choosing regarding legal issues related to the assessments.

17.  How do we ensure that a transaction which we close will have no unresolved claims for prior unpaid fees?

We can provide an Estoppel Certificate in recordable form.  The fee for an Estoppel Certificate is $50.00