A demand letter is a formal, detailed statement issued by a homeowner association through its management company acting as its agent. The statement is provided to an escrow company in connection with the sale of the property or the refinance of the property. The statement and . payment of the amount calculated and demanded by the management company is relied upon by the escrow company, buyer, seller, mortgage lender, and title insurance company if the transaction is a sale. Otherwise, the escrow company, owner, mortgage lender, and title insurance company rely upon the accuracy of.the information provided.

Escrow demand letters are generally provided to the escrow company along with a completed lender's questionnaire, insurance information, and various documents.

Providing an inaccurate demand letter can result in significant liability so great care must be exercised in preparing them.

The person preparing a demand letter must be prepared to calculate the following amounts that may be owing: (1) Regular assessments, (2) Special assessments, (3) Fines owing, (4) Late fees owing, (5) Collection costs owing, and (6) Interest owing. All amounts must be prorated to the actual date of closing.

Lender's Questionnaire - Purpose

Escrow Holders - Functions

Demand letters usually have an appropriate expiration date and must often be updated prior to the closing date.