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CO-OP/CONDO BUYERS

Can the Bank Deny Our Mortgage Application Because of a Lawsuit at the Co-op Building?

Mark Levine in Co-op/Condo Buyers on July 23, 2015

Tips on Buying a NYC Apartment, New York City

Tips on Buying a NYC Apartment 11
 

July 23, 2015 — A lender may decide against granting a loan to someone who is seeking to purchase into a building if it is involved in a lawsuit that may not be covered by insurance. In such an event, the lender may consider the lawsuit detrimental to the financial well-being of the complex. It is important to know what the lawsuit is about and the potential financial outcome. If the lender is concerned that a judgment issued against the property would lead to an assessment being passed to offset financial loss, the complex could issue a letter to the lender indemnifying it from liability. However, this would not alleviate the purchaser’s requirements to pay his/her portion of any such assessment.

If the lender is concerned about a potential lack of funds to cover any such judgment, the board can take preventive measures to ensure that a sufficient amount of money will be held in its reserve account. For example, the board could determine that it should maintain an amount equal to three months of maintenance or common charges.

Additionally, the purchaser can always look to lenders that have issued loans to other owners in the complex. By doing so, the purchaser would be working with a lender that has had previous experience with the complex, understands the financial history, and would better be able to assess the risks of lending.

Mark Levine is vice president of Excel Bradshaw Management Group.

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