Tag Archives: condominiums

Massachusetts Condominiums Should have Websites–It outta be the Law

Condominium, , ,

Condominiums in Boston, Massachusetts and surrounding towns come in all shapes and sizes. There are a plethora of 2 and 3 Unit condominiums, former personal properties where the owner usually lived in one of the apartments, and rented out the other apartments to family or third parties. These “Mom and Pop” building are NOT the subject of this post.

What I am addressing is Condominiums with four or more Units. These Units were either built as Condominiums, or have been converted from apartment buildings to condominiums. Some of these larger units are self-managed, but the great majority are managed by professional managers. These managers do not make things easy for the Unit Owners. There is almost always a charge for move-ins and move-outs and there is a charge for a 6(d) certificate, so-called, which indicates that there are no unpaid common area charges for a Unit which is being sold.

Condominium Documents, when available, are unsigned, and amendments thereto are not furnished. Floor plans are not readily available, especially now since Massachusetts condominium law has been amended so as not to require the recording of a certified floor plan at the  first-time sale of a Unit.

So, at least in Massachusetts condominiums, the law should be changed so that Condominiums with four or more Units, should be required to maintain a Website, which contains, at a minimum the following items:

     1. Floor Plans of each Unit

     2. A complete set of  recorded Condominium Documents, and amendments, with Registry information included.

     3. A form of a 6(d) Certificate which requires only “fill-ins” for completion.

     4. The names of the current, of record, Trustees.

     5. The name, telpehone, and email address of the individual who needs to be contacted to fill out Condominium Questionnaires as required by lender.

I would also suggest that Unit Owners have restricted access to minutes of the Trustees, so that Unit Owners can be kept up to date on proposed assessments and other matters affecting the Unit Owners. These can be distributed to prospective Buyers at the Sellers’ discretion, but I know that I always ask for them when I am representing a Massachusetts condominium Buyer, and they are often extremely helpful.

The cost to set up a webpage continues to go down. The need for an effective vehicle for Unit Owner and realtor communication is real. I would be interested in hearing your response to this initiative. In my mind as a Massachusetts title attorney with over 40 years of experience, this change in the Massachusetts condominium law is way overdue.

Shut Out by the Restrictive FNMA/FNMLC Condo Financings Rules–Another Option you Can explore

Condominium, ,

In the course of representing a developer of a 6 Unit Condominium in Boston, I may have uncovered some information that can be helpful to the ActiveRain community. There is a lender out there who will make FNMA type loans (not portfolio) on projects which the lender, itself, certifies to its own satisfaction. This lender does its own “due diligence” and decides whether the project is acceptable.  There are some conditions (of course), the most important of which is that the certification must be while the project is in a “pre-sale” mode.

That means that this lender will not certify older, existing condominiums where the owner-occupancy standards are not met, only newly marketed units. Nonetheless, having a financing source for the many still unsold projects which are really not “saleable” may be worth your while to explore.

For obvious reasons, I prefer not to broadcast the lender in question. If any of my New England readers want to get more details, contact me at etopkins@topbev.com. I am glad to give out the referral; I just am not authorized to broadcast it.

Elliott Topkins

www.topkinsandbevans.com

Difficult Condominium Trustees and Officers–The Enemy Down the Hall

Condominium, , , ,

Recently. I have experienced difficulty in dealing with Condominium “management”, so-called, with respect to matters which involve my clients. I am a Massachusetts title and real estate attorney, and in the course of my representing both Buyers, Sellers and current  Unit Owners of condominiums in Massachusetts, I have experienced an array of frustrations, including the following:
     1. Answering Lender Questionnaires.

Getting the condominium officials to respond to the Lender’s Questionnaire, so that a mortgage loan can be processed in connection with a sale. Recent underwriting restrictions have made the answers to the Questionnaire more important than ever. Most condominiums are not involved in litigation, or disputes with Unit Owners. The Lender needs to know these things, and the Questionnaire is the vehicle. Many times I have experienced situations where the Trustees just can’t get around to providing answers. There is no urgency for them, and they take theri sweet time.

     2.Disputes between the Trustees and a Unit Owner

These can range from permitting a Unit Owner to fix his or her Unit after a natural or other disaster to approving a request to do structural work to personal “vendettas” between neighbors. Most older documents do not have Arbitration provisions. In that situation, the affected Unit Owner often must initial litigation to rectify a perceived wrong. The irony of this type of situation is that once a litigation is begun, the affected Unit Owner  must pay not only his or her own legal fee, but a percentage share of the legal fee incurred by the Condominium Trustees to defend. As a practical matter, this unfairly inhibits the ability of a Unit Owner to protect his or her rights.

     3. Arbitrary or Capricious Trustees or Officers

There is not much that can be done with a person who wants to say “no” to every suggestion, even down to the need for the Trustees to have frequent meetings and keep minutes of meeting. If the difficult Trustee doesn’t like you. or doesn’t like anyone, you have a major problem, and the expense and stress of going to Court to have a Trustee removed is huge.
     4. Charges for Items that should be Free.

 Why is it really fair for a condominium to charge $150 for a Certificate that there are no Common Area liens on a Unit which is being sold? Why should a selling Owner be charged $200 for a “move-out” fee? Where is the justice in any of this, but, as most of you know, it happens, and it can chill transactions.

There are solutions to these problems, but they are not easy to effect, especially with the requirement that Mortgagees need to be involved in Master Deed amendments. These are some solutions which I would recommend, however, and they should improve the situation materially:

     1. Pay Trustees a decent stipend for serving. I would suggest forgiving two or three monthly common area fees for Trustees. That would encourage more people to become Trustees and eliminate the “Trustee for Life” people who have nothing better to do than frustrate the realistic requests of Sellers, Buyers and Unit Owners.

     2. Amend the Declaration of Trust to permit arbitration of disputes, with the losing party required to pay not only its fees and costs, but the fees and costs of the winning party. This approach would force more attention on reasonable compromises.

     3. Set term limits for management companies and Condominium officials. Change management companies every three years. Only permit Trustees to serve for two (2) terms. This will make it possible for new ideas and new approaches. it will, in effect, end “tyranny”  by the current regime.

Please let me know your ideas on this!!! I am quite willing to spearhead an offensive to change things in Condominium operations. Such changes are way, way overdue.

New Condominiums–More TRAPS for the unwary

Condominium, , , ,

It is starting to happen again. Just like it did in the late 1980’s and early 1990’s. Condominiums are in financial trouble, I have previously written a Featured Post about delinquent condominium Unit Owners and what Trustees MUST do to collect common area fees from them.

A similar, but potentially much more serious, situation obtains with the Condominium developer. As most of you probably know, as soon as the Master Deed is recorded, each Unit in the recorded document must start paying common area fees. There is some question whether each Unit needs to contribute the required amounts to the reserve account. That varies from state to state. Let’s just stick with the fee for each Unit for operations.

The law is that the developer must pay condominium common area fees for his unsold Units. I am afraid that this requirement is “more honored in its breach than in its observance”, as the Bard would say. Cash flow is generally tight for new developers, and they perhaps cannot afford to pay. They can deliver a Certificate at the closing, indicating that the common areas fees are paid with respect to the Unit which is being purchased. It may well be a different story for the unsold Units.

My suggestion in this area is that the real estate professionals representing the BUYER need to be militant. Place a provision in the Purchase and Sale Agreement or Rider where the SELLER makes an affirmative statement that the common area fees for all Units owned by the SELLER are current. Require the SELLER to demonstrate that fact at the closing by bringing a Condominium Bank Statement which  proves that payment has been made.

Once the SELLER understands that there will be no closing without everything being current, there will be a great incentive to make matters right. The numbers can really “explode” unless some approach is taken to require the developer to keep up the monthly payments. It is not a pleasant situation for a new BUYER to walk into a situation where there are financial problems at day one. All of us need to work hard to try to prevent this.

If you are looking for suggested P & S language for these situations, please contact me at etopkins@topbev.com. I am a Massachusetts real estate attorney, but I am reasonably confident that the language I have developed will hold up in other jurisdictions, as well.

“Kiddie” Condos–They make more sense than ever in this Market

Condominium, Marketing / Communication, , , ,

I have written about “kids at school” in prior posts. With more kids at college and grad school (grad school, especially grad school, because jobs our of college are becoming so scarce), there are some strategies we can suggest for “kiddie” condos which may produce some sales for realtors, mortgage originators and real estate attorneys (my defined group “The Resource Triangle”.

These are my thoughts:

      1. Price of Condominiums are lower than they have been. Certain areas of Boston have held up better than others; in general the market is soft, especially in the $200,000 to $400,000 range.

      2. Rental prices are increasing because people have to live somewhere, and they are not buying as rapidly as they did. The rental population is on the increase, as well.

      3. There are some distinct tax strategies which make a parent’s purchasing a condominium for his or her child during the time that the child is a student:

          a. After tax benefits, the actual cost may be lower than rental.

          b. At some point in time, the parent can make the child the owner of the Unit, thus entitling the child to take advantage of the $250,000 exclusion when the Unit is sold. In Boston (and other cities, I am assuming), owners who live at the premises are also entitled to favorable real estate tax treatment.

          c. If we are at the bottomo of the real estate cycle, or close to the bottom, the appreciation in the Unit can be passed on to the child, rather than the parent. That becomes a handy way to handle estate planning transfer for the parent.

          d. In Boston, I am aware of several Lenders who have developed “Kiddie” Condo programs. Wainwright Bank, a Lender for whom I do a lot of work and an ActiveRain member, has such a program.

If your customers need any further advice about Kiddie condos, have them contact me directly. I have completed at least fifty (50) of thes e deals in the past three years, all of which have worked to the Parent’s advantage.

Condominium Due Diligence–Our Professional Responsibilities

Condominium, , , , ,

The stormy winter we have experienced needs to be factored in when purchasing a condominium unit. Roofs and other systems have been under a considerable amount of strain, and according to casualty insurance statistics, claims are at record levels.  Those leaks through ceilings and walls can be plastered and painted over. The causes of the problems, however, are being addressed by Condominium associations and the results may well be future special assessments. I am continually told by Sellers that the Condominium Trustees “do not keep minutes of their meetings.” This is distressing on two levels (1) is it a short-hand way of saying the Trustees really never meet? or (2) are there matters which are being discussed which can have potential financial impact to the Unit Owners, which the Trustees would rather keep to themselves? In either circumstance, this type of response raises a “red flag” for me, the attorney tying to protect my client who is considering a Condominium purchase.

More than at any time, the present state of Condominium governance places a responsibility on us as real estate professionals to ask questions and probe.  Ask the Management Company or a member of the Condominium Board of Trustees whether the Condominium is planning an assessment for a new roof or extensive system repairs. If there are assessments coming, try to negotiate with your Seller to pay some ,or even all, of planned assessments. Speak to other unit owners. Find out what they know.

At Topkins & Bevans, we pride ourselves on giving responsible representation to Buyers.  We review (1) Condominium documents, (2) minutes of the Trustee meetings and (3) recent budgets. and financial statements. We poke holes in these documents, where necessary. We direct question to the Management Company, the Trustees and the Seller so that when the Buyer moves forward, he or she is apprised of the animal he or she is dealing with. Sometimes, our Buyers move forward even though we have warned them of the pitfalls associated with their purchase. That is their choice, but at least we have permitted them to make an informed decision.

Short Sales and You

Condominium, Short Sales & Foreclosures, , , ,

Short sales are a natural outgrowth of the recession we have been living through. People have lost jobs or become ill at the same time as the equity in their homes has been eroding. They have fallen behind in their payment or payments, yet even when they make the intelligent decision to cut their losses and sell, their net proceeds will not permit them to pay the mortgages in full.

Initially, banks and other lenders did not show muc sympathy to people in this kind of quagmire. In the last few years, however, even the most rigid of lenders have realized that “short sales” ,so-called, represent a cheaper alternative than foreclosure in almost all circumstances. Therefore, short sales have achieved a level of acceptance which make them an option every time a homeowner is behind ih his or her mortgage(s).

I have had considerable experience in dealing with short sales, and I would offer the following advice to those of you, who become involved either as selling agents or buyer’s brokers in short sales:

1. Do your Homework. Obtain as much information from, and about, your Seller. You need to know not only about first mortgages, but second and sometimes third mortgages as well. Make the listing agent furnish current statements from the mortgage lenders, if you can. Ask a friendly real estate attorney to do a “current owner” search of the property. I do them all the time from my computer. Normally, they will provide excellent information on what mortgages are outstanding.

2.  Work out the possibilities of Resolution Before You get in too deep. When there are second and third mortgages, the problems escalate rapidly. If these junior positions are not getting something out of the short sale, they may balk.  Make sure the Seller has addressed this issue with the first mortgage holder. A lot of time will be wasted if the junior lienors will not move.

3. Taxes and Other Municipal Liens. In many instances, when the mortgage has not been paid, neither have the taxes and water and sewer. You will be dealing with a Seller who has no money. In certain circumsatnces, you may resolve the mortage liability but the unpaid munipal charges will make the deal not feasible for your Buyer.

4.  Common Area Fees. The same criteria which make munipcipal charges a problem can also be a problem with common area fees for a Condominium Unit purchase as a short sale. The Trustees of a Massachusetts Condominium have the power to foreclose on outstanding common area fees and sell the Unit at auction. Many Condominium Trustees are unaware of this power or unwilling to spend the time and effort to make these sales happen. Despite their sloth, the lien for common area fees still exists. Know the amount of the arrearages, and see what might be done to compromise same, so that future payments can be applied to the future, not past due arrearages.

5. Short Sale Documentation. Nothing short of an executed letter from the lender or lender is acceptable to confirm a short sale agreement. Accept no substitutes!!! Have the closing agent confirm the validity and accuracy of the executed letter before a closing is scheduled.

6. Offer and Purchase and Sale Provisions. A realtor I respect has told me she insists on the following approach, and language, when she is working with a short sale Buyer:

              a. She will put down no more than $100.00, with the Offer to Purchase or Purchase and Sale Agreement.

              b. The balance of the Buyer’s deposit will be due only upon receipt of lender written approval(s), which has/have been verified as duly authorized by the closing agent.

              c.  The period of inspection will commence only after receipt of the approval(s) described above.

              d. The Buyer’s financing contingency date shall be twenty (20) days after receipt of approvals(s). The Buyer’s financing application date shall be three (3) business days after receipt of such approval(s).

If the steps outlined above are taken, realtors can save themselves, and their Buyers, a lot of wasted effort and expense. There is nothing worse than having the belief that a short sale transaction is going through, only to find out that the proper authorizations have not been obtained from all people who have liens on the property, and a sale transaction which many people have worked hard to make happen, will fail. See my blog: www.realtorsresourceblog.com for other areas of interest