Termite-Tenting and Your HOA

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The treatment of termites during the sale of your property has always caused issues with the seller and buyer on what should be done prior to putting your home on the market, who should pay for the treatment and damage, or what is customary in dealing with termites.  And of course how termites are handled by homeowners that own single family detached homes or a condominium governed by HOA’s are completely different.

Major termite issues with condominiums or townhomes usually come up during the sale of a unit in which the HOA normally covers the cost of extermination and repair of exterior wood damage.  (Not all HOAs cover the cost of treating termites.) The extermination of the termites is usually handled by using spot treatment of chemicals because the tenting of an entire building involving several homeowners is not feasible or necessary to solve the termite problem.  However, in some cases the termite damage can only be solved by tenting the entire building.

I would like to bring attention to this aspect of the HOA’s authority in mandating that each unit in a condominium building be tented for termites.  A recent article written by Kelly G. Richardson, Managing Partner of Richarson Harman Ober PC, identifies the termite-tenting requirement is reinforced by California civil code.  I have included excerpts of Richardson’s article below that explains the HOA’s authority under the civil code to enforce homeowners to evacuate to permit tenting.

Termite treatment in associations is often a controversial issue. Some years ago in La Jolla, the La Jolla Shores Clubdominium HOA board had decided, after consulting an expert, to spot treat termite infestations in the property. A homeowner believed the association was negligent in not tenting the buildings and sued the HOA. In the landmark 1999 case of Lambden v. La Jolla Shores Clubdominium HOA, the California Supreme Court adopted a rule of judicial deference toward HOA maintenance decisions, so long as the board observed the Business Judgment Rule. Presumably, your association has likewise obtained input from experts before deciding that tenting is the best approach.

It can at times be difficult to get residents to cooperate. Some residents find the selected date inconvenient, some do not make it a priority, and others simply fear the process of tenting their homes. Civil Code 4785 provides an important tool for HOAs regarding termite treatment. If the HOA provides at least 15 days advance written notice to the occupants and owner, and the occupants do not vacate the premises, the HOA can “cause the summary removal” of the occupant so that the treatment can proceed.

The association normally will notify owners and occupants well in advance of the upcoming treatment, and send each owner not only information from the termite treatment company about preparing their home, but also an acknowledgment form in which the occupants confirm they will vacate the home for the required dates.

The “summary removal” mentioned in the statute does not mean the HOA can physically eject the occupants. Legal process still must be invoked. Usually, this is in the form of an emergency court order from a judge. After obtaining the order, the HOA can proceed to open the unit for the treatment to proceed. The assistance of law enforcement may be needed if the occupants still refuse to leave.

Not all HOAs have the same responsibility regarding termite treatment. Under Civil Code 4780, condominium, cooperative, and community apartment associations are responsible for termite treatment, unless the CC&Rs provide otherwise. However, under Civil 4780(b), planned developments are not responsible for termite treatment, unless the CC&Rs provide otherwise.

For planned developments in which the residences are attached (typically in townhouse configuration), this can be a problem, since most original CC&Rs do not mention termite treatment.  Without a CC&R provision empowering the HOA to prevent termites, the planned development association may not be able to properly protect the structures.  Attached planned development association boards should consult their legal counsel on this issue.

Homeowners should cooperate with the HOA treatment plan, which protects their investment.

Request for Repairs

This week’s Blog is a summary discussion on the Request for Repairs List.

Buyer’s Request for Repairs as the result the home inspection can often be a major stumbling block to getting the sale closed. It can be a shock to the Seller and Buyer for the following reasons:

  1. Negotiations were assumed completed, but now are effectively reopened if both parties want to close the sale.
  2. Every California Purchase Agreement states that the home is sold “As Is.” The Seller is not required by the contract to fix any repairs.  If the Seller refuses to address the repairs, the Buyer can either accept the house as is or back out of the deal.
  3. A contractor is required to fix the repairs before the close of escrow.
  4. In lieu of a contractor, a dollar credit to the buyer maybe requested for the repairs.
  5. In lieu of a credit, a reduction in the purchase price maybe requested.
  6. Termite repairs are now included in the request for repairs which were prior to 2015 included in the purchase agreement as a seller expense.
  7. The Seller’s Net Proceeds analysis excludes any mention of the cost to the repairs.

If all of the above items are not handled properly, the transaction at worst will be cancelled or at a minimum will leave an upset seller or buyer.

As a listing agent, I highly recommend my sellers to do a complete home and termite inspections prior to putting the home on the market.  Usually there is considerable push back from the homeowners to pay for these inspections, but buyers will eventually find out what needs to be fix.  Ideally, whatever is discovered during the inspections the items should be fixed to ensure a smooth closing.  Buyers also are pleased to see that the homeowner has taken the time to prepare their home for sale.  The biggest advantage is that there are no surprises for either party.

As a buyer’s agent, I ensure that my buyers understand the concept of “As Is” purchase and their options. In today’s low inventory and multiple offers, the seller’s have more leverage forcing the buyers to accept the house with no repairs. However, seller’s are motivated to complete the sale the first time around. I focus on the repairs that are safety issues and most seller’s will not want to sell a home that have a safety concern.

Now some thoughts on how repairs should be completed.  From the seller’s perspective, completing the repairs through a contractor are a hassle to coordinate and may cause the buyer to comeback if not done properly.  It would be best to provide a credit or a price reduction so that the liability is left with the buyer to complete the repairs.  However, a credit may cause a delay by the buyer’s lender if the credit is over 2 to 3% of the purchase price.  Also a credit may not cover the actual expense without getting accurate quotes.  So buyers prefer the repair to be done by a licensed contractor prior to the close of escrow.  The Sellers will prefer to provide a credit or price reduction.  In practice, repairs are handled 50% of the time by credits/price reductions and 50% of the time by sellers hiring a contractor to complete the repairs.

If repairs are completed by the seller, sellers are required by the purchase contract to demonstrate the repairs were completed along with receipts from the contractors  during the final verification of property condition walk-through.

I am sure this summary discussion will help you understand how to handle repairs that come up during a home inspection.