KNOXVILLE, Tenn. (WATE) — An East Tennessee man was surprised with Homeowner’s Association fees that were part of the closing costs on his home in Knoxville. Another thing that caught his attention was the HOA fees that the buyer of his home had to pay.

He’s worried that some of the fees could be a dealer killer. He said the fees were revealed just two days before closing.

Ralph Tucker recently moved to a new home in Jefferson County. He’s a retired business owner and a University of Tennessee graduate. He went on to receive an MBA and a PhD at two other schools. Tucker is familiar with contracts and what should be disclosed in them. He moved from the Hearthstone Neighborhood in North Knoxville last May. The relatively new community has a Homeowner’s Association, which he appreciated. However, two days before the closing on his old house, a fee dealing with the development’s HOA caught his attention.

“I took a look at it, everything looked fine. There was a $200 fee. I assumed it was going to the HOA treasury. I subsequently found out that was not the case,” said Tucker.

HOAs are an important part of the quality of life in a housing community, and you are expected to pay association dues as part of living in a managed development. However, if you decide to move from a community with a HOA, or move into a previously owned unit that has an HOA, you may expect some last-minute expenses.

The fee he had to pay is written in small print.

“It’s described as an HOA Estoppel fee,” said Tucker.

In real estate legal terms, an Estoppel fee is presented at closing to resolve all accounts between the HOA and the seller before the property changes ownership. Tucker assumed the fee would be paid to the Hearthstone HOA.

“I found out that it didn’t go to the HOA. I’ve been told by non-legal personnel that they don’t believe it was a legal fee because it was not board-approved by the HOA,” said Tucker.

The fee instead went to the Cedar Management Group, a company that manages Homeowners Associations like that at Hearthstone. Tucker questioned the fee. In its response to him, Cedar Management wrote the fees are not part of the contract between Cedar and the Hearthstone HOA and are not charged to the board. They are part of normal closing costs.

“Well they told me that the fee was legitimate and that was their overhead,” said Tucker.

There was another closing fee that caught his attention. Tucker’s daughter sold her home at Hearthstone in a few months after he sold his. When he compared his closing costs to hers, there was a difference in terminology.

“This is my daughter’s closing statement. She paid a $200 fee. Hers was called differently. It’s an HOA certification fee,” said Tucker.

Cedar Management sent this explanation of the Certification Fee: The Certification Fee is an administrative fee that covers the cost of certifying the dues and advising of any outstanding fees associated with the property.

Tucker then questioned some closing fees paid by the buyer of his home. They include two separate fees for a total of $525.

“The people who bought my house paid a Capital Contribution fee, which hopefully did go into the funding of the HOA treasury,” said Tucker.

A capital contribution is a fee that is the initial cost a new owner pays to become part of the development’s HOA. Of $525, Tucker said $125 was paid into the HOA treasury. The remaining was an administrative fee that to the best of Tucker’s knowledge stayed with the management company.

Tucker discovered there were different buyer fees from $400 to $525 paid from May through September.

“My concern is if people sell the property at some point with a high interest rate, a buyer is going to come in and look at a $500 administrative fee and back out of the deal,” said Tucker.

Cedar Management Group answered all of Tucker’s questions. WATE reached out to the company for comment and has not heard back. If you want to avoid any surprises at closing, the first step would be to check with the closing attorney. He or she will disclose the fees that both the seller and buyer are responsible for paying. It is wise to hire an attorney if you sell or buy into a community with an HOA. Especially, if you don’t want to be surprised.