Under what condition is it illegal for an HOA to prepare a disclosure document?

The correct answer, indicating that it is illegal for an HOA to prepare a disclosure document when the association uses a management company, stems from the legal framework governing homeowners' associations (HOAs). In many jurisdictions, including New Mexico, there are regulations that address the responsibilities and authority of management companies.

When an HOA employs a management company, the expectation is that the company manages the operational duties and financial activities of the association. This includes the creation and distribution of necessary documents, such as disclosure documents, which are crucial for informing potential buyers of the community's rules, fees, and other important information. If the management company is responsible for these tasks, the HOA itself should not prepare these documents because doing so could lead to discrepancies and confusion about the official stance of the association.

In instances where the HOA manages its affairs directly, disclosure documents are typically required, especially when a property is listed for sale or when the community has a budget. Nevertheless, the involvement of a management company changes the dynamics, making it a legal issue for the HOA to independently prepare a disclosure document, as the management company is often expected to handle such responsibilities in accordance with the laws and regulations governing the community.

Understanding these nuances aids in comprehending the role of management companies within HOAs