The Virginia Resale Disclosure Act (“RDA”) governs the resale certificate disclosure provisions of the Virginia Property Owners’ Association Act (“POAA”), the Virginia Condominium Act (“Condo Act”), and the Virginia Real Estate Cooperative Act. The RDA is the go-to place to check for regulations regarding the rules for delivery of the resale certificate, what the certificate should contain, and the Buyer’s rescission period. How does this impact your practice?
What is a resale certificate? Is it the same as a resale packet?
Yes! Previously, the term “resale disclosure packet” referred to the stack of documents you received from homeowners’ associations (“HOAs”), while “resale certificate” was the preferred term for condominiums. On July 1, 2023, the RDA was updated to refer to both packages as the “resale certificate.” It’s a small change, but it’s part of the RDA’s effort to create the same process for all types of common interest communities. § 55.1-2307. Definitions.
The resale certificate contains vital information for Buyers to know about their association, such as governing documents, notices of violations against the property, reserve studies, and minutes from meetings of boards of directors. § 55.1-2310. Resale certificate; form and contents.
What are the Seller and listing agent’s requirements to deliver the resale certificate?
Either the Seller or their agent is required to obtain the resale certificate from the association and deliver it to the Buyer or their agent. This requirement cannot be waived. Upon the Seller or listing agent’s request (and payment of fees), the association has 14 days to deliver the resale certificate. If the association does not produce the resale certificate within 14 days, the resale certificate is deemed to be unavailable. § 55.1-2309. Resale certificate; delivery
Practice tip: Listing agents should keep track of this deadline! Remember that the Buyer has the right to void the contract at any time under the RDA until the resale certificate is delivered, and this right can possibly continue until settlement. However, once the 14 days pass, the Seller or listing agent can send a notice to the Buyer or their agent that the resale certificate is unavailable. Delivery of this notice will start the clock for the Buyer’s review period, preventing the right to void under the RDA from continuing until settlement.
What constitutes “delivery” of the resale certificate? How can agents prove delivery?
The RDA allows for flexibility as to how the resale certificate is delivered, stating that delivery must be to either the Buyer OR their agent. This means that delivery to the agent alone may be sufficient to satisfy the requirements of the RDA.
Paragraph 6 of K1321 – NVAR Residential Sales Contract reads:
Realtors® are already careful to ensure that delivery of any notices or documents to the Buyer during a real estate transaction follow this paragraph, meaning that if a Buyer inputs two email addresses under paragraph 6(B), delivery may only be considered valid if sent to both those emails. The same standard applies for the RDA: delivery of the resale certificate to the Buyer must follow the terms above in order to be deemed valid. Exception: However, remember that the RDA and the contract state that delivery may also be to the Buyer’s agent; thus, as long as the resale certificate is sent to the Buyer’s agent, even if all of the Buyer’s emails are not included, then it may still constitute valid delivery.
Finally, note that the contract defines when delivery is deemed to have occurred. If a listing agent delivers the resale certificate by email, the date of delivery is the date the email was sent to either the Buyer in accordance with paragraph 6 or their agent. If there is any dispute, the Seller has the burden of proof to show that the certificate was delivered. Neither party is required to affirmatively provide proof or confirmation that the resale certificate was received.
To put it plainly, follow these steps:
Who was the resale certificate sent to?
a. The Buyer’s agent only:
i. Valid delivery.
ii. Mechanism of delivery (email, print, etc.) does not impact validity.
b. The Buyer only:
i. If exactly in accordance with paragraph 6(B), valid delivery.
ii. If different from the selections in paragraph 6(B), invalid delivery.
c. Both the Buyer’s agent and Buyer:
i. Valid delivery.
ii. Mechanism of delivery (email, print, etc.) does not impact validity.
When is a resale certificate considered “delivered”?
a. Day of hand-delivery, courier service, mail, fax, or email (whichever comes first) to:
i. Buyer’s agent, OR
ii. Buyer, if this is the Buyer’s selected mechanism of delivery in 6(B).
b. For properties subject to multiple associations, the resale certificate is not considered delivered until delivery of the last resale certificate.
Practice tip for Buyer’s agents: Keep an eye on your email! If the Seller or listing agent only delivers the resale certificate to you, then you are responsible for providing it to your Buyer as soon as possible so they can get started on their review.
What are the timelines for the Buyer’s right to cancel the contract?
Pursuant to § 55.1-2312. Cancellation of contract by purchaser, Buyers have a statutory right to review the resale certificate and can choose to cancel, or void, a contract depending on the information therein. This time period has many names: recission period, right of review, cancellation period, etc. While the RDA no longer requires the recission period to be three (3) days, if any blanks in the contract are left empty, the time period defaults to three (3) days.
Remember that “day” is defined in the sales contract to begin counting the day AFTER delivery, and ends at 9:00 PM. For example, let’s say the parties agreed to one (1) day for the Buyer’s recission period. The listing agent delivered the resale certificate to the Buyer’s agent on a Tuesday at 8:00 PM. Day 1 begins the following day, Wednesday, and continues until 9:00 PM that evening.
Here’s when Buyers may void the contract pursuant to the RDA. These provisions may be modified by the parties by written agreement. The parties are free to fill in whatever number they agree to in the blanks:
If the resale certificate, or notice that it is unavailable, is delivered before contract ratification:
- Until 9:00 PM days after the ratification date.
- If left blank, until 9:00 PM three (3) days after the ratification date.
If the resale certificate, or notice that it is unavailable, is delivered on or after contract ratification:
- Until 9:00 PM days after delivery.
- If left blank, until 9:00 PM three (3) days after delivery.
At any time prior to settlement if the resale certificate, or notice that it is unavailable, is not delivered to the Buyer.
- Buyers have this protection no matter what number of days they agree to in the blanks above, even 0.
Practice tip: Remember the 14-day rule! If the resale certificate is not provided by the association within 14 days of the Seller or listing agent’s request, then the resale certificate is deemed to be unavailable. Listing agents may then send a notice of unavailability to the Buyer to start the clock on the other two timeframes.
Finally, the Buyer’s reasoning for cancelling the contract within this timeframe is not necessarily relevant, as this is a protection awarded to Buyers under Virginia law. If a Buyer exercises their right to void under the RDA, the Seller is required to return the EMD to the Buyer in full and promptly sign a release of contract.
Is delivery of an incomplete or outdated resale certificate valid delivery?
Yes, as provided by § 55.1-2312. Cancellation of contract by purchaser. Delivery of an incomplete or outdated resale certificate still starts the clock for the Buyer’s recission period. The Buyer’s remedy, should they receive a resale certificate that lacks important information, is to void the contract within the allotted timeframe.
When do resale certificates expire? Can I reuse a resale certificate from a previous transaction?
Resale certificates do not necessarily “expire.” The RDA requires that resale certificates be current as of the date specified within the resale certificate itself. § 55.1-2309. Resale certificate; delivery. This means that if a resale certificate is dated October 1, 2020, then the documents within must be current as of October 1, 2020 – even if this certificate is being delivered for a transaction five years later.
Delivery of an outdated resale certificate, or one from a previous transaction, is a risk management decision. The older a resale certificate is, the less information a Buyer has to understand the association, and the more likely they are to exercise their right to void.
Is the resale certificate less than a year old? Either the Buyer or the Seller may request a financial update from the association pursuant to § 55.1-2311. Updated resale certificate; financial update. This is a lower-cost option to avoid ordering an entirely new resale certificate, as the association would simply provide any information they have changed since the last version was issued. Note that ordering a financial update does not pause or toll the Buyer’s rescission period.
Can the Buyer waive their right of rescission? What if the parties agree to “0” days in the contract?
The RDA allows for the parties to a contract to agree to waive or modify the rescission period in a manner that works best for them. There is no limit on the number of days for the rescission period, and no requirement that a rescission period be provided at all.
However, note that agreeing to 0 days for the rescission period does not mean the Buyer has automatically waived their right to void under the RDA. In this this event, the Buyer still has a few opportunities to cancel:
Until 9:00 PM on the ratification date, if the resale certificate was delivered before ratification;
Until 9:00 PM on the date of delivery, if the resale certificate was delivered on or after ratification; or
At any time prior to settlement if the resale certificate, or notice that it is unavailable, is not delivered to the Buyer.
The parties would have to expressly waive the rescission period entirely in order to remove any times where the Buyer could void. This may be accomplished via an addendum that clearly waives the Buyer’s right to void under the RDA.
Though the parties may agree to 0 days or waiving the rescission period entirely, NVAR does not recommend this practice. The rescission period was created to explicitly protect Buyers by giving them an adequate opportunity to determine if the covenants of the association meet their needs as homeowners. Realtors® should not encourage their Buyers to waive or vary their statutory rights without the Buyer’s full understanding and consent nor should they encourage their Sellers to pressure Buyers into waiving or negotiating them away. In the event a Buyer wishes to agree to 0 days and/or to waive their right of rescission entirely, we recommend Realtors® provide Buyers with Form K1308, Buyer’s Acknowledgement of Potential Adverse Consequences.
What information should Buyers look for in a resale certificate?
Because real estate agents are not authorized to practice law, you may not interpret the governing documents within the resale certificate for your client. Instead, you can provide your Buyer with NVAR Form K1390 – Understanding Your Rights Under the Resale Disclosure Act. This is an optional acknowledgement form (not an addendum!) to help consumers understand what they should be looking for in the resale certificate. The form not only lists the requirements from § 55.1-2310. Resale certificate; form and contents, but it also clearly outlines a Buyer’s right to cancellation of a contract.
How can I report an HOA or condo if the association isn’t following the rules?
It can happen! You do everything right for your client, but occasionally, you run into an association that isn’t responding to your requests or providing complete resale certificates. In an event where a homeowner believes their association is not following Virginia law or acting in the owners’ best interests, they may wish to file a complaint with the Department of Professional and Occupational Regulation (DPOR) Office of the Common Interest Community Ombudsman (CICO). The CICO has a helpful flowchart to visualize this process. For more resources, please see: Office of the Common Interest Community Ombudsman | Virginia Department of Professional and Occupational Regulation.
Most HOAs and condos are represented by counsel. It may be useful for the homeowners to contact the association’s counsel to request them to take action to protect the association’s best interests. If there is no attorney, or if homeowners believe the association continues to fail to protect its members, you may contact your own attorney to compel them to act. Here are some we can recommend: Legal Services.
What is my Buyer’s recourse for HOA or condo violations? Can they “walk away” from the deal?
If you have any questions about the RDA or navigating Realtor® duties with regards to common interest communities, please contact Legal Hotline & FAQs for further information.