Jeremy Hankin
Partner, Hankin & Mazel

Condo collapse fallout. When a lender provides financing for an apartment purchase or refinance, it is not only vetting the borrower's financial viability, it’s also reviewing the co-op’s corporate structure, its financials and the physical condition of the building. The lender also asks for insurance information, occupancy makeup, and how many sponsor-own units and rented units there are. This has been going on for a while. Now, after the condo collapse in Florida, the federal mortgage giants Fannie Mae and Freddie Mac are requiring six months of board meeting minutes. That's a new thing.

A building physical. There are essentially five things they're looking for: building violations, any planned capital improvements, any assessments and the reason for them and the payment terms. They also want to know if the assessments are related to safety and structural stability. And lastly, they want to know if the co-op has had an engineer's report done on the building within the last five years. 

Play ball. Board minutes contain sensitive information, and there’s a spectrum of ways to provide this material to the lender. One option is providing the minutes as is. Another is to provide redacted minutes. A third is to provide the minutes after getting the lender’s signature on a confidentiality agreement. You have to do it in a way that protects the co-op.

Providing meeting minutes is not optional. If the requirement is not met, lenders won't give a loan to the unit. And if you have a building where the units can't get loans, then the value of the units themselves will go down. That's the reason why we played ball with lenders before, and that's the reason why we have to play ball with them  now.