A condominium is a building or complex of buildings containing a number of individually owned apartments, houses, or buildings, where each owner has full title to its individual apartment, house or building, and an undivided interest in the shared parts of the property. Examples of the “shared parts of the property” are hallways, elevators, building exteriors, garages, walkways, yards, recreational facilities, and streets. Condominiums can be commercial or residential in nature, but all will be controlled by some type of condominium/homeowners association.
Since many SBA loans are secured by condominium collateral, it is important for a lender to know the rules and regulations that may have been put in place on such condominium collateral prior to closing its loan. The best way to accomplish that is to obtain and review a copy of the condominium declaration that should be recorded in the land records for the County the property is located in and any amendments to same. The Declaration can contain vital information in relation to the following:
Securing this information best protects the lender’s interest in the condominium property and the priority of its lien, and discloses any restrictions that might have to be taken into account upon foreclosure of the condominium. If for some reason a lender is not able to obtain a copy of the applicable declaration, it should request, at the bare minimum, an estoppel letter and written approval from the association prior to closing.
For more information on condominium collateral, contact the attorneys at Starfield & Smith, PC at 215.542.7070.
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