Several days ago an acquaintance was telling me that she sold a property at an auction that was subject to a sewer caveat (lien). The caveat arose out of the installation of sewers in the neighborhood and was originally payable in annual installments over 20 years, of which 5 annual installments had been paid. Of course the town in which the property was located charged interest on the principal amount of the caveat over the entire 20 year period. The person who bought the property at the auction refused to close unless the seller paid off the caveat in full. As the property was in another state and was sold "as-is" and "with all faults", the seller took the position that the buyer was in default and thereby forfeited the deposit money.
I thought about the issue after the conversation and was of the opinion that the buyer by custom and practice in CT would be responsible for the balance of any long-term lien or caveat by a governmental
agency for capital improvements that was payable over a long period of time. The situation also arises in the context of condominiums and HOA special assessments for capital repairs or improvements within a common interest community. I was not satisfied with my recollection of the practice in CT and did some quick research.
As we have seven counties in CT and the customs and practices are established by the bar association for each county. I found that three counties have no published customs and practices and I found that George Souto wrote a blog in January of this year about the Bar Association of Middlesex County just getting around to the point to putting pen to paper to put their customs and practices in a written form. Well, they have not yet apparently finished their writing as I did not find any written customs or practices for Middlesex County or for Tolland or Litchfield Counties.
I located written statements of practices for real estate closings for all the other counties and for the Greater Bridgeport Bar Association, which has its own practices even though it is part of Fairfield County which has a written statement of practices. All of the practices are in agreement that the seller is responsible to pay off the entire amount of any caveat or lien for sewer installation unless otherwise agreed in writing between seller and buyer. All the counties with a written statement of practices also coincide on the issue adjusting at closing the interest for the current fiscal year, but not the amount of the principal installment for the current fiscal year, if the buyer agrees to assume the balance. The reason being that interest is paid in arrears.
Only one county, New London County, adressed the issue of unliquidated caveats, i.e., caveats that have not yet been reduced to a fixed number. If the amount of the caveat has not been established as of the closing date, the buyer is responsible for the full amount of the caveat whenever it is finally established.
As for special assessments by an HOA for capital repairs or improvements the general rule is that there is no adjustment of any nature at the closing. Seller is responsible for all paymenbts due prior to the closing and the buyer is responsible for all payments due after the closing. No adjustment is made for principal or interest. The exception to the general position in all counties with an actual written statement of practices is Hartford County which requires the seller to pay in full any special assessment by the HOA. I will point out that the written statement for Hartford County is a draft proposal from 2009 and it is not completely clear that the written statement of practices in Hartford County has been actually adopted by the Hartford County Bar Association.
I would think that most brokers and agents have a good idea which properties are subject to these matters if they are familiar with their neighborhoods at all. The best practice if the property does have a caveat, lien or assessment is to specify in the contract whether the seller is to pay in full or if the buyer will assume the balance and not leave the issue to customs and practices. Not everyone knows the customs and practices in fine detail and I believe that it is always better to put it in writi9ng regardless of the situation.
The foregoing is not to be construed in any manner whatsoever as legal advice or a legal opinion. If you have questions about local practices and customs in your area, contact a competent real estate attorney.
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