Bulletin: GA2010001

Dear Associates:

We are often asked to insure over existing homeowner's and condominium association assessments on sales and refinances of properties. This Bulletin will clarify underwriting guidelines when a property to be insured is subject to these assessments.

Under the Georgia Property Owners Association Act, a Homeowner's Association (HOA) may make assessments against lot owners residing in a particular development or subdivision for their proportionate share of the expenses of materials and services provided by the HOA pursuant to O.C.G.A. §44-3-232. Likewise, condominium associations may impose assessments on individual unit owners for the common expenses of the condominium's maintenance and operation. O.C.G.A. §44-3-109(a). Homeowner's and condominium assessments constitute a lien against the individual units or lot owner's property from the date the assessment becomes due and payable notwithstanding the fact that the assessment may be billed in installments over a period. The recording of declaration serves as notice of the assessment lien and no further recordation of notice of a claim of lien is required by the association to create an enforceable lien against the property. These liens lapse and become unenforceable four (4) years after the date the assessment first became due and payable. See O.C.G.A. §44-3-232 (c) and O.C.G.A. §44-3-109(c). Under Georgia law, homeowners and condominium associations are required to furnish a written statement regarding amounts due and payable within five (5) days from the receipt of a request in writing for such a statement. See O.C.G.A. §44-3-232 (d) and O.C.G.A. §44-3-109(d). The failure of the association to provide this information within the five day period has the effect of extinguishing the lien as to any interest acquired by the purchaser or lender and their successors and/or assigns.

COMPANY POLICY: It is our Company policy not to insure over these assessments unless all amounts due and payable are paid in full through the date of closing on sales and refinances of properties subject to homeowners and condominium association assessments. Issuing Agents must confirm that all assessments and charges are paid current or obtain current amounts of the unpaid assessment against the unit through the date of closing by obtaining a satisfactory written statement from the Association or its officers or agents. Generally, an Associations' contact information can be found on the Georgia Secretary of State's website if the owner is unable to provide this contact information. The Issuing Agent should control the payment of any delinquent or unpaid assessments directly to the Association. Issuing Agents should also take specific exception to all the pertinent recorded documents, including the Declarations or other instruments which create the right of the association to assess liens or charges in any policy of title insurance.

On real estate owned (REO) sales, where the foreclosing lender objects to the payment of assessments and charges against the former owner/borrower, Issuing Agent must confirm that the Declaration contains specific language which subordinate any and all assessment lien(s) to the foreclosed security deed or mortgage encumbering the property and establishes the priority of that security deed over all such future charges and assessments. We continue to require proof that there are no unpaid assessments that become due and payable during the time that the bank owned the property through the date of the REO closing.

If you have questions related to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.